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The World Bank

- JOE OmCL USE ONLY

IN(/. QG6I d - JA

lain No. P-4207-IN

REPORT AND RECOMMENDATION

OF THE

PRESIDENT OF THE

INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT

TO THE

EXECUTIVE DIRECTORS

ON TWO

PROPOSED LOANS

TO

INDIA

(IN THE AMOUNT OF $165 MILLION EQUIVALENT)

AND TO THE

INDUSTRIAL CREDIT AND INVESTMENT CORPORATION OF INDIA LIMITED

(IN THE AMOUNT OF US$35 MILLION EQUIVALENT)

FOR THE

CEMENT INDUSTRY PROJECT

February 14, 1986

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CURRENCY EQUIVALENTS

US$1.00 = Rsl3.ORs 1.00 = US$0.077Rs 1 million = US$76.92

The US Dollar/Rupee exchange rate is subject to change.Conversions in the Staff Appraisal Report were, exceptas otherwise noted, made at the rate of US$1.00 = Rs 13which represents the projected exchange rate over thedisbursement period.

FISCAL YEAR

Covernment : ApriL 1 - March 31ICICI : April 1 - March 31IDRI : ApriL 1 - March 31Companies : Birla, CCI, ICL - April 1 - March 31

KCP - July 1 - June 30ACC - August 1 - July 31

ABBREVIATIONS AND ACRONYMS

ACC - Associated Cement CompaniesBirla - Birla Jute and Industries, Ltd.CCI - Cement Corporation of IndiaCMA - Cement Manufacturers' AssociationDEA - Department of Economic AffairsFOB - Free on BoardGDP - Gross Domestic ProductGNP - Cross National ProductGovernment (GOI) - Government of IndiaHLC - High Level Committee on the Cement IndustryICB - International Competitive BiddingICICi - Industrial Credit and Investment Corporation of IndiaICL - India Cements, Ltd.IDBT - Industrial Development Bank of IndiaOPC - Ordinary Portland CementPPC - Pozzolana Portland Cement

- Shree Dig Vijay Cement Co. Ltd.STC - State Trading Corporat-%nTPD - Tons per DayTYP - Tons per YearUP - Uttar Pradesh

FOR OMCIAL USE ONLYINDIA

CEMENT INDUSTRY PROJECT

LOAN AND PROJECT SUMMARY

Borrower: GOI Loan: India acting by its President.ICICI Loan: Industrial Credit and Investment

Corporation of India Limited(ICICI)

Amount: US$200 million equivalent consisting of: GOILoan: US$165 million; and ICICI Loan: US$35million.

Terms: GOI and l-ICI Loans: 20 years, including5 years' grace at the standard variableinterest rate.

On-lending Terms: GOI Loan: GOI would provide US$1.5 millionequivalent to ICICI as a nonreimbursablegrant. The balance of US$163.5 million wouldbe onlent to the ICICI and the IndustrialDevelopment Bank of India (IDBI) in equalproportions, to be repaid over a period notexceeding 20 years with a grace period notexceeding 5 years, and would bear GOI'sstandard interest rates for loans to finan-cial institutions (currently 10.25Z perannum). GOI would bear the foreign exchangerisk on the loan. Subloans would be repaidover a period not exceeding 13 years includ-ing 4.5 years' grace, with interest at ICICIand IDBI standard rates on rupee loans(currently 14% per annum). Proceeds of theUS$35 million ICICI loan would be relent tosubborrowers on terms ranging between 7-10years and up to 2 years' grace, with aninterest rate at the variable IBRD rate plusa spread of 2Z per annum.

Project Description: The project would help the cement industryof India to achieve a higher operatingefficiency through (i) modernization of itsfacilities including conversion of sixprivate sector cement plants (AssociatedCement Companies' Mudukkarai and Shahabad,Birla Jute and Industries Satna, IndiaCements Limited Sankarnagar KCP's Macherlaand Sri Digvijay Cement Company Sikka), andone public sector plant (Cement Corporation

This document has a restrited disrbuto and may be used by recipients only in the performanCe of|Ithde ofricisl dume Its wntents may not otherwise be discled without World Bank autborization.

of India's Mandhar Plant), from theinefficient wet process to a modern dryprocess-precalciner technology, and small-scale rehabilitation and modernizationinvestments at other cement plants;(ii) training programs and curriculumdevelopment; and (iii) technical assistance.The project would improve fuel efficiency,increase cement output, enhance environmentalcontrol, upgrade operator skills, and promotethe policy for complete decontrol of pricingand output. The project faces no specificrisks, except those associated withinfrastructure constraints including, interalia, shortage of transport facilities, coal,and power supply.

Estimated Cost /a (US$ Millions)Local Foreign Total

(a) Conversion Subprojects, Trainingand Technical Assistance

- Base Cost (June 1985 Prices) 141.1 131.2 272.3- Physical Contingencies 10.6 - 9.0 19.6- Price Escalation 24.6 18.8 43.4

TOTAL 176.3 159.0 335.3

- Interest during Construction 30.1 15.6 45.7Total Financing Required(Conversion, Training 206.4 174.6 381.0and Technical Assistance)

(b) Small Scale Modernizationand Rehabilitation 52.3 36.5 88.8

GRAND TOTAL 258.7 211.1 469.8

/a Includes US$55 of taxes and duties.

Financing Plan: US$ MillionsLocal Foreign Total

GOI 113.5 15.6 129.1ICICI/IDBI & Other 133.3 7.4 140.7IBRD 11.9 188.1 200.0

258.7 211.1 469.8

Estimated Disbursements:

(US$ Millions)IBRD FY FY86 FY87 FY88 FY89 FY90 FY91 FY92

Annual 6.5 46.7 74.6 47.8 17.5 5.7 1.2Cumulative 6.5 53.2 127.8 175.6 193.1 198.8 200.0

Rate of Return: About 25X.

Appraisal Report: No. 5901-IN, dated December 23, 1985.

INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENTREPORT OF THE PRESIDENT TO THE

EXECUTIVE DIRECTORS ON TWO PROPOSED LOANS TO INDIA AND ICICIFOR THE CEMENT INDUSTRY PROJECT

1. I submit the following report and recommendation on two proposed loansto India and ICICI for US$175 million equivalent on standard IBRD terms, tohelp finance a cement industry project, in order to enhance the operatingefficiency of the cement industry, increase production of cement and upgradeoperator skills. Of the proceeds of the US$140 million loan to India,US$1.5 million would be passed on by GOI to the Industrial Credit andInvestment Corporation of India Ltd., (ICICI) as a non-refundable grant tofinance training and technical assistance at the subsectoral level;US$138.5 million would be onlent in equal proportions to ICICI and theIndustrial Development Bank of India (IDBI) to finance conversion of six cementplants, provide project related training and technical assistance and assist inupgrading major training facilities. US$35 million would be a loan toICICI,with the guarantee of the Government of India, to finance small-scalemodernization and rehabilitation of other cement plants.

PART I - THE ECONOMY 1 /

2. An economic report, "India: Structural Change and DevelopmentPerspectives" (5593-IN, dated April 24, 1985), was distributed to the ExecutiveDirectors on May 1, 1985. Country data sheets are attached as Annex I.

Backtround

3. India is a large and diverse country with a population of about 760million (in mid-1985) and an average per capita income of about US$260.Agriculture continues to dominate the economy, accounting for 36Z of GDP, 23%of exports and about two-thirds of employment. The steady increase inpopulation, which continues at a rate of 2.2% a year, has put increasingpressure on natural resources, in particular cultivable land. By the mid-1960s, nearly all productive land had been brought under cultivation. Whileirrigation continues to increase total cultivable area, an increasing share ofthe labor force will have to be absorbed in non-agricultural activities.Industrial deve'lopment has not progressed rapidly enough to provide employmentopportunities for the growing labor force, or to bring about a rapid economictransformation, with significantly higher productivity and income levels. As aresult the long-term growth of per capita income has only averaged about 1.4%p.a. and close to one-half of India's population continues to live below thepoverty line. The pervasiveness and intensity of poverty is such that itsalleviation has been and remains at the core of India's development strategy.

]j Parts I and 11 of the report are similar to Parts I and II of thePresident's Report for the NABARD Credit Project (No. P-4225-IN), datedFebruary 3, 1986.

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4. During the 1950s and 1960s, India's economic performance was generallycharacterized by slow economic growth, moderate inflation and a sustainableexternal position. GDP rose at about 3.5%, with agriculture and industrygrowing at 1.8% and 4.8% respectively; imports increased by 4.6% and exports by5.8Z a year. India was able to reduce its dependence on foodgrain imports froma peak of 14Z of total foodgrain consumption in 1966/67 to 4.5Z by 1969/70through improvements in agricultural production, but progress in povertyalleviation was slow mainly because of continued high population growth.

5. In the early to mid-1970s, in response to a sharp deterioration inIndia's terms of trade, the Government introduced various policy measuresdesigned to stimulate exports. This resulted in a large increase in exportgrowth to about 7.3X per annum in the 1970s compared with only 2.2% per annumbetween 1950/51 and 1969/70. While expanding world markets, particularly inthe Middle East, contributed to this growth, liberalized access to importedinputs and more effective export incentives played a major role. The successin the export expansion effort coupled with continued import substitution,particularly of foodgrains resulted in a surplus on current account between1976/77 and 1978/79, which was further enhanced by increased concessional aidflows. India was thus in a relatively favorable position to deal with theincreases in international oil prices, the sharp deterioration in the terms oftrade and a series of poor harvests. The comfortable foreign exchange positionalso played a major role in the Government's decision to initiate importliberalization.

6. Towards the end of the 1970s, India again faced considerable domesticdifficulties. In 1979/80 it experienced one of the country's worst droughtswhich caused a large reduction in agricultural production. In addition,industrial production, plagued by labor unrest and a vicious circle of supplyshortages (coal, power and transportation), failed to expand. These eventscoincided with a second round of international oil price increases. As aresult, the current account reverted to a deficit position and the remarkableprice stability that the Indian economy enjoyed after 1975 came to an abruptend. The Government responded by mounting an adjustment program, which wasembodied in the Sixth Five Year Plan (1980/81 - 1984/85). The program aimed atraising the GDP growth rate from its historical level of 3.6% to 5.2% per annumwhile adjusting the country's external balance to the adverse price develop-ments in world markets. The major elements of the program were alleviation ofinfrastructure and supply constraints, increased energy independence, improvedefficiency in resource use, promotion of exports and efficient importsubstitution.

Economic Performance Under the Sixth Plan

7. Overall the Government's adjustment program has been effective despitethe severe drought in 1982/83 and a worsening of the external environment inthe early 1980s. During the Sixth Plan period, GDP grew by 5.1% per annum, 1/

l/ Actual GDP growth rate during the 1979/80-1984/85 period was 5.1% perannum. However, this figure overstates the trend in recent years becauseof the relatively low base year (1979/80). The 4.5% GDP growth per annumand 3.3% annual agricultural growth between 1980/81-1983184 (two "normal"years) are more representative of the growth rates during the period.

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vell above India's long-term growth rate of 3.6%. However, overall growthduring the first half of the 1980s has not been steady, mainly because of theeffect of uneven rainfall on agricultural production. In 1980/81 and 1981/82,the economy substantially recovered from the 1979 drought, with real GDPgroving by 7.6Z and 5.3%, respectively. The recovery was particularly robustin agriculture where normal weather helped output to rise by more than 15% in1980/81 and 5.5% in 1981182. A severe drought in mid-1982 brought the economicrecovery to a halt. Agricultural output declined by 4Z, which in turn reducedGDP growth to only 1.8Z, and put further strains on the balance of paymentsand domestic resource situation. The timely implementation of various economicpolicies relating to foodgrain imports, procurement and distribution, and theincreased allocation of power to irrigation pumps mitigated the adverse effectsof the poor monsoon. An excellent monsoon combined with satisfactory perfor-mance of the infrastructure sectors, in particular coal and transport, led to arecovery of the economy in 1983/84. Agricultural output rose by 9%, industrialoutput by 4.5% and overall GDP by 7.4%. The power sector, however, emergedagain as a constraint on higher growth, especially in industry. In 1984/85,despite a mediocre monsoon and difficult political circumstances, the aggregategrowth of the economy is likely to range between 4 and 4.5%.

8. During the Sixth Plan period, foodgrain production continued to growat an average annual rate of 2.6% a year-sufficient to maintain a broadbalance between supply and steadily increasing domestic demand. The progressachieved is an indication of the effectiveness of programs to expandirrigation, strengthen extension and encourage efficient use of other agricul-tural inputs which are being implemented. Bountiful harvests have led torecord foodgrain stocks in recent years. Over the past year, Government heldstocks have increased by more than 40%. Maintenance of ample, balanced operat-ing stocks to ensure smooth operation and even expansion of the publicdistribution system remains a top priority of Indian agricultural policy. Yet,the financial cost of foodgrain storage and subsidies represent a rapidlygrowing burden on the budget.

9. Growth of the industrial sector during the Sixth Plan period was slowand uneven. Industrial growth averaged about 3.4% a year--below the growthrates achieved in the 1960s and 1970s. An inadequate policy environment,coupled with depressed domestic demand, power and raw material shortages, aswell as labor unrest are the main causes for the slower than anticipated growthof the industrial sector. After the severe drought in 1979/80, manufacturingoutput grew at 1.7% in 1980/81 and 3.32 1981/82. The drought in 1982/83, whichled to widespread shortfalls of agro-based raw materials and a sharp drop inthe demand for consumer durables, combined with a prolonged textile strike inBombay, reduced the growth of industrial output to 1.7% in that year.Following the excellent monsoon in 1983/84, industrial output gained momentumand grew by 5.0%. Preliminary estimates place the growth of the manufacturingsector at about 5.5Z in 1984185.

10. The performance of the infrastructure sectors was mixed under the SixthPlan. While electric power generation, coal production and railway trafficgrew by 8.7%, 6% and 2.5% a year respectively, oil and gas production increasedby 22.6%. The rapid expansion of domestic oil production is largely the resultof India-s oil development program. Backed by substantial financialcommitment, performance under the program has been excellent with real invest-ment and oil production levels running well ahead of Plan targets. In 1984/85

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domestic oil production is estimated to have reached 29.4 million tons. Whilethe gap between domestic consumption of petroleum and production remains large,Iudia's dependence on oil imports dropped from 63% of consumption in 1979/80 to30% in 1984/85. About two-thirds of current output comes from offshore fieldsaround Bombay High. As most of these fields have now reached thei.: maturestage, further increases in domestic oil production will have to c : mainlyfrom new discoveries.

11. India's economy nias reverted from a situation of a resource eurplus iuthe late 1970s to an aggregate resource deficit during the Sixth Plan period.The gap between gross investment and national savings increased from negligiblelevels to an average of 2.1% of GDP in 1980-85. Gross domestic capital forma-tion increased from an average of 22.6% of GDP in 1975-80 to 24.7% in 1980-85while gross national savings remair.'d constant at an average of 22.6% of GDP inboth periods. The increase in capital formation mainly resulted from anincrease in the public investment rate, but it was largely a financial ratherthan a real phenomenon since prices of investment goods increased considerablyfaster than the general price level.

12. The basic thrust of fiscal policy during the Sixth Plan was to providesufficient- r-esources for growth and planned investment while maintaining infla-tion under control. However, the SiKth Plan period was characterized by Sig-nificant budgetary resource constraints. Despite massive additional resourcemobilization efforts, public sector deficits exceeded 7% of GDP as compared toonly 4-5% of GDP during the mid-1970s. The shortfall was met by additionalmarket borrowings, both domestically and from abroad and by deficit financing.Major reasons behind the large deficits were continued losses by mostdepartmentally-run undertakings, unsatisfactory performance of the two majornon-departmental undertakings of the States (the State Electricity Boards andthe State Road Transport Corporations), and the increasing importance of sub-sidies which are estimated to have reached 2.8% of GDP in 1984/85. Of these,fertilizer accounted for more than 0Q8% of GDP, and food subsidies nearly 0.5%of GDP.

13. D-:velopments in the savings-investment balances were mirrored in thebalance of payments. Thus, India's current account balance, which had recordedsurpluses between 1976/77 and 1978/79, reverted to deficits averagingUS$3.5 billion and 2.1% of GDP during 1980-85. Several developments con-tributed to these relatively large deficits. First, the terms of tradedeteriorated sharply in I079/80 due to Lhe secord round of oil price increasesand continued to move against India during the first three years of the 1980s.Second, a more liberal import policy towards industrial inputs was pursued.Third, net invisibles d.eclined as travel. receipts fell off, workers' remit-tances stagnated (reflecting slower development acti'Ji1ty in the Middle East),and payment of interest on highP7 levels of foreign debt increased. Fourth,export growth was sluggish partly due to growing domestic demand, and, perhapsmost significantly, due to depressed foreign markets and prices. Faced with agrowing need for external capital inflows and stagnatior in the availability ofconcessional assistance, India drew SDR 3.9 billion .rom the Extended FundFacility of the IMF and borrtrwed sigvificant amounts on commercial terms fromthe Euro-dollar market and inicxeased rhe use of suppliers' and export credits.

14. Price performance during -.he Sixth Plan period has been mixed. Theoverall improvemert in economic performance in .he e;rly 1980s, combined withmore restrictive monetary poll- es in 1981j82 and i982/g3, resulted in a sharp

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decline in the rate of inflation. The growth rate of wholesale prices declinedfrom 18Z in 1980/81 to only 2.6Z in 1982/83. The lagged effects of shortagesof foodgrains in 1982/83 and of other agricultural products and industrialgoods in 1983/84 coupled with a rise in the domestic cost of imports and rapidliquidity growth, gave a boost to inflationary pressures towards the end of1983/84. The annual average growth of wholesale prices rose to over 9% in1983/84, and the rate of growth of consumer prices exceeded 12Z. In September1984, the Government took a number of measures to dampen pressure on pricesincluding increased imports of important agricultural comodities (sugar, jute,coconut oil and others), releases of sugar stocks for distribution through fairprice shops, and a reduction in wheat prices for flour mills. These measures,together with a decline in cereal prices as a result of the bumper crop in1983/84 and a generally restrictive budgetary policy, led to a slowdown in therate of increase of wholesale prices to about 7.1% in 1984/85.

15. Developments in the Indian economy during the Sixth Plan underscore theprogress that has been made in recent years towards accelerated GDP growth,external adjustment, and increased investment. The experience of recent yearsillustrates that India has the capacity to grow and develop at a more rapidpace. It is a tribute both to the fundamental soundness of key policies andprograms, particularly in agriculture, and to the strength and effectiveness ofpublic administration, that neither the serious political disturbances inPunjab, nor the assassination of Prime Minister Indira Gandhi, resulted insignificant disruptions to the performance of the economy in the last year ofthe Sixth Plan. But the results during the Plan period also highlight thedisappointing performance of industry, the continuing shortfalls in electricpower generation, the rising public sector deficits, the importance of regain-ing and sustaining momentum in export growth and the need for continued prudenteconomic management so as to avoid a resurgence of inflation while generatingadequate resources for development. This mixture of achievements andchallenges provides the context for an assessment of development prospects andpolicies.

Development Prospects and Policies

16. To deal effectively with its dual challenges of alleviating pervasivepoverty and expanding employment opportunities for a growing labor force, theSeventh Plan is expected to aim at sustaining an annual rate of growth of GDPof at least 5Z. The Seventh Plan which will lay down the development strategyfor 1985/86-1989/90 is alsn likely to continue the emphasis on agriculture,energy development, export promotion, domestic import substitution whereeconomically justifiable and the removal of infrastructural bottlenecks.

17. Achieving a GDP growth of around 5Z a year will place heavy demands onpolicy adjustment and entail major challenges. India will need to:(a) maintain the recent higher rate of expansion of agricultural production;(b) accelerate industrial production and export growth through policy changeswhich enhance competition and efficiency; (c) expand supply capacities in theeconomy by improving basic infrastructure services and the availability ofenergy; (d) improve the efficiency with which resources are used, includingparticularly the existing capital stock in infrastructure and industry; and(e) further improve the already high resource mobilization effort.

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18. Agriculture. Despite an impressive performance under the Sixth Plan,Indian agriculture faces many challenges in the second half of the decade. Aspossibilities for extending cultivated acreage shrink, agricultural growth willdepend on finding new ways of increasing the productivity of land throughfurther development of irrigation, better water management, more intensive useof new technology, efficient delivery of inputs and services, and appropriatepricing policies. High priority must be given to the expansion of thecountry's irrigable area through completion of ongoing irrigation projects, aswell as selective investment in new undertakings. Besides creating new irriga-tion potential, the efficiency of irrigated farming will have to be enhancedthrough the improvement of water management practices in existing irrigationsystems. Greater emphasis should also be given to obtaining higher yieldsunder rainfed and dryland farming conditions. Finally, even greater effortsmust be made to build and strengthen institutions to ensure the efficientdelivery of agricultural services, input supplies, credit and technology.

19. Industry and Trade. Prospects for raising India's GDP growth ratewill, to a large extent, depend on more rapid industrial production and exportgrowth to be attained through improved productivity and efficiency. A keyrequirement will be greater competitive pressure on industry than has been thecase in the past. The size and domestic orientation of the Indian economy makeit necessary that this competitive pressure come mainly from within thedomestic economy. An important complement, however, will be greater exposureto foreign trade to stimulate domestic competition as well as to inducetechnological innovation and modernization.

20. To increase domestic competition, domestic policies will need to allowfreer entry and exit of firms in the industrial sector and greater reliance onmarket price signals. While the Government has taken various initiatives inthe above directions during the past several years, the most significant wereannounced in the context of the 1985186 Budget. These include the broadeningof licensing categories for certain industries, delicensing for others,increases in the size limits for MRTP 1/ and small-scale industries, reductionsin the incentive for small-scale industries to stay small and various initia-tives to stimulate efficient indigenization of 'sunrise' industries (energyexploration equipment, computers, telecommunication equipment, motor vehiclesand parts, general electronics). These are significant advances that need tobe sustained in future years.

21. Changes in external trade policy will also be required to stimulateexport growth which is essential not only for current financing of imports, butto enhance borrowing capacity, to service debt, to provide an impetus to theeconomy from the demand side, and to expose entrepreneurs to the quality-consciousness of competitive external markets. While some changes have beenrecently introduced, there remains a need to: (a) provide greater access toimported inputs and capital goods through continued import liberalization(b) review tariffs, eliminating anomalies and lowering their overall level; and(c) modify trade policies in such a way that the net impact of incentives ismore neutral between exports and import substitution.

1/ Monopolies and Restrictive Trade Practices Act, 1969.

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22. Infrastructure Sectors. Investments in these sectors currently con-stitute about one-third of total investment in India, and the efficiency withwhich these investments are managed has an important bearing on the efficiencyof total investment and the growth rate of the entire economy. There issubstantial evidence that better planning and management of public investmentsin power, coal, railways and irrigation could improve returns and lower thecurrent capital-output ratios. For example, more efficient use of investmentcouli be achieved by better water management in irrigation projects, improvedload factors in thermal power generation, better capacity utilization in thefertilizer industry and improved efficiency in railway transport.

23. Resource Mobilization. India's gross national savings rate (22.6% in1980-85) is already high for a country at India's level of income.Nevertheless, the investment required to sustain the relatively high GDP growthrates realized during the Sixth Plan period--while holding foreign savings as ashare of GDP at prudent levels--will require some further increase in theaggregate savings rate especially in public savings. Because there willcontinue to be well-founded demands for expansion of current and capitalexpenditures in the public sector, the burden for a reduction in the savingsinvestment gap has to be put on the revenue side. Increasing tax rates beyondtheir current high levels would be counter productive. Thus, economicallyefficient pricing policies in public enterprises, supported by improvements intheir operational efficiency, are to be preferred over tax increases asvehicles for increased public resource mobilization. The sheer size of pastand present public enterprise investment indicates that if proper returns weremade even only a part of them, an increase in revenues of about 3% of GDP wouldbe attainable. In a number of sectors, e.g. thermal power, railways, andfertilizer, concerted efforts are being made-with Bank assistance-to increaseefficiency and reduce costs. These efforts need to be improved and expandedinto new areas.

24. Balance of Payments. A policy of sustained GDP growth of 5Z per annumwill need to be complemented by measures which assure a viable balance ofpayments position. Acceleration of industrial growth will lead to a substan-tial increase in import requirements, even after allowing for continued importsubstitution of key bulk commodity items. Bank staff estimates place theexport volume growth necessary to support these growing import requirementswithout excessive increases in external borrowing at about 8% a year over theSeventh Plan period. Prospects for India to attain the needed higher exportgrowth rates appear to be reasonably good because India's share in total worldexports in value terms is only about 0.4Z, leaving ample room for growth.Furthermore, India's exports are relatively less sensitive to fluctuations indemand in the OECD industrial countries because exports are well diversifiedwith respect to both products and markets. Nevertheless, success in India'sexport drive will depend heavily on changes in domestic policy to improve thesupply and profitability of exports.

25. Even assuming favorable export performance, India will continue to needsubstantial external capital flows to augment its own resources for theforeseeable future. Even with 8% export growth, the 5% GDP growth implies anincrease in gross capital inflows from US$17.5 billion to US$34.5 billionbetween the Sixth and Seventh Plan periods. In the past, the bulk of thisfinancing was provided in the forn of official development assistance. In morerecent years the availability of concessional assistance to India has declined.

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Total bilateral grants and concessional loans declined from a level of aboutUS$1.3 billiou per annum over the years 1979/80-1981182 to US$1 billion in1983184. Moreover, there was a large deterioration in the terms of aid frommultilateral sources. For example, while total lending from the Bank Groupcontinued to increase in nominal terms, the grant element declined from 71% to41% as new commitments of IDA declined from a peak of US$1,535 million in FY80to US$673 million in FY85.

26. In the event that official development assistance does not increasesignificantly from recent levels, nearly the full additional financing requiredwould have to be provided from additional non-concessional borrowing fromofficial and commercial sources. This vill increase India's debt service ratiofrom the present level of 15.5% to 21.6Z by 1989/90. Provided India can infact, expand export earnings along the lines described earlier, and providedIndia's past record of prudent borrowing and debt management continues, thecountry should be able to raise the projected amounts. While its foreignresource requirements would be manageable, the increase in its external debtexposure would leave it with little cushion to deal with unfavorable even-tualities and with the risks of policy change.

27. In the short term, a relatively large level of external borrowing,including an increased emphasis on commercial borrowing, will be necessary tocope with the balance of payments cousequences of the growth strategy describedearlier. Although India is currently in a position to increase borrowing oncommercial terms from the very low levels of the past, there are, of course,limits beyond which India will choose to sacrifice growth objectives ratherthan accept debt on unfavorable or ntmanageable terms. While therefore agreater volume of both official concessional and non-concessional assistanceis warranted, concessional assistance, in particular, will be invaluable inmoderating the build-up in India's debt service burden. Apart from the quan-titative arguments for concessional aid, there remains the imperative to assistTndia in addressing the problems of pervasive poverty. While India is nowbetter placed than other poor countries to tackle its development problems, themobilization of additional resources to address poverty problems is heavilyconstrained. Concessional assistance can also play a very important role inrelieving this constraint.

28. Summary. India has demonstrated that it can sustain a rate of growthcloser to 5.0% per annum than to the long-run trend of 3.6% per auuum. If therate of population growth can be brought to below 2.0% per annum, a 5.0% growthrate would mean a doubling of the trend rate of growth of per capita incomeof 1.4% per annum. Success in these efforts would make a significantdifference to the prospects of easing poverty in India. Development prospectsover the next few years will hinge on the extent to which the economy can bebrought into both internal and external balance, while at the same time achiev-ing more rapid growth than in the past. This will require the continuation ofthe current development strategy which assigns high priority to exportpromotion, public finance discipline, improvement of economic efficiency, andinvestment in infrastructure, supported by adequate flows of external borrowingand aid.

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PART II - BANK GROUP OPERATIONS IN INDIA

29. Since 1949, the Bank Group has made 91 loans and 182 developmentcredits to India totalling US$8,487 million and US$13,753 million (both netof cancellation), respectively. Of these amounts, US$1,544 million has beenrepaid, and US$7,360 million was still undisbursed as of September 30, 1985.Bank Group disbursements to India in the current fiscal year throughSeptember 30, 1985 totalled US$179 million, representing an increase of about5 percent over the same period last year. Annex II contains a sumary state-ment of disbursements as of September 30, 1985.

30. Since 1959, IFC has made 35 commitments in India totallingUS$301 million, of which a total of US$168 million has been repaid, sold,terminated or cancelled. Of the balance of US$133 million, US$126 millionrepresents loans and US$7 million equity. A sumary statement of IFC disburse-ments as of September 30, 1985, is also included in Annex II (page 5).

31. The thrust of Bank Group assistance to India has been consistent withthe country's development objectives in its support of agriculture, energy andinfrastructure. Of particular importance have been investments in irrigation,extension and on-farm development designed to increase agriculturalproductivity, and efforts to improve the availability of basic agriculturalinputs to farmers through credit, fertilizer, marketing, storage, and seedprojects. Major elements of the lending program have also been directed athelping to meet the energy needs of the economy while curbing the growth of oilimports, and to ease the infrastructure bottlenecks which have hamperedeconomic growth in India, particularly through power generation anddistribution, and railways and telecommunications projects. The Bank Group hasalso provided financing for a broad range of medium- and small-scale industrialenterprises, primarily in the private sector, through its support of develop-ment finance institutions. Recognizing the importance of improving the abilityto satisfy the essential needs of urban and rural populations, the Bank Grouphas supported nutrition and family planning programs, a rural roads project, aswell as water supply and sewerage and other urban infrastructure projects.

32. This pattern of assistance remains highly relevant, and consonant withGovernment priorities, as reflected in the the Seventh Plan. First, highpriority will continue to be given to GOI's agricultural program. While Indiahas made significant progress in agriculture, productivity growth will have tobe sustained to improve the balance between food demand and supply and tocontribute to poverty alleviation and employment. Thus, the Bank Group willcontinue to support irrigation, fertilizer production and distribution, andagricultural extension and credit. Second, alongside GOI's efforts in promot-ing greater efficiency and faster development of the industrial sector,increased assistance will be provided for industrial development. Third, inline with the stress which the Seventh Plan gives to the expansion and moreefficient use of basic infrastructure capacity and to the development ofIndia's indigenous hydrocarbon resources, the Bank Group will continue toprovide substantial support to the development of the energy, transport andtelecommunications sectors to alleviate critical shortages which constrainoutput in both the agricultural and industrial secto2s. Fourth, support ofurban development and other GOI basic social services programs for the poor

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vill also continue in light of the growth in population which, despite succes-ses in lowering birth and death rates, still increases by about 16 million eachyear.

33. The need for a substantial net transfer of external resources in sup-port of the development of India's economy has been a recurrent theme of Bankeconomic reports and of the discussions within the India Consortium. Thanks inpart to the response of the aid community, India successfully adjusted to thechanged world price situation of the mid-1970s. However, India continues torequire a substantial level of foreign assistance both to offset the overalldeterioration in the world trade environment, and to sustain the relativelyhigher investment and growth rates achieved during the Sixth Plan period. Asin the past, Bank Group assistance for projects in India should aim to includethe financing of local expenditures. India imports relatively few capitalgoods because of the capacity and competitiveness of the domestic capital goodsindustry. Consequently, the foreign exchange component tends to be small inmost projects. This is particularly the case in such high-priority sectc-rs asagriculture and irrigation.

34. India's poverty and needs are such that whenever possible, externalcapital requirements should be provided on concessional terms. Accordingly,the bulk of the Bank Group assistance to India in the past was provided fromIDA. However, IDA lending to India is declining from a peak of US$1.5 billionin FY80, mostly due to funding constraints related to IDA. The amount of IDAfunds available to India is likely to remain small in relation to India's needsfor external support. Thus, this requirement for additional assistance willhave to be met, in part, through larger Bank lending. Given its developmentprospects and policies, India is judged creditworthy for Bank lending to sup-plement IDA assistance. A continuation of efforts already underway to achievegrowth in productive capacity, trade expansion, higher levels of savings,foodgrains self-sufficiency and a reduction in the rate of population growthshould result in continued economic growth and improvement in the balance ofpayments. India's debt service ratio is estimated at about 15.2% in 1984/85.This ratio is projected to rise to around 20% by 1989/90, mainly due to thehardening structure of India's debt; and to increase slightly over this levelthrough the mid-1990's. Although the projected debt service ratios are con-siderably above historical levels, they are still manageable and will notadversely affect India's creditworthiness.

35. Of the external assistance received by India, the proportion con-tributed by the Lank Group has grown significantly. In 1970/71, the Bank Groupaccounted for 22% of total commitments, 11% of gross disbursements, and 10% ofnet disbursements as compared with 68%, 38% and 47%, respectively, in 1984/85.In 1984/85, about 26.3% of India's total debt service payments were to the BankGroup. On March 31, 1985, India's outstanding and disbursed external publicdebt was estimated to be about US$26.5 billion, of which the Bank Group's sharewas US$11.1 billion or 42% (IDA's US$8.9 billion and IBRD's US$2.2 billion).As of September 30, 1985 outstanding loans and credits to India held by theBank totalled US$20,696 million, of which US$7,360 million remain to bedisbursed, leaving a net amount outstanding of US$13,336 million.

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PART III - CEMENqT INDUSTRY iN InDI

Background

36. India's cement industry accounts for about 3.5Z of the total productionof the industrial sector, and in 1984/85 represented about 1Z of GDP at factorcost. In 1983/84, the subsector including limestone quarries, employed about100,000 people, or about 1.2% of total employment in the organized industrialsector (cement plants alone account for 70,000, or 0.8Z of the total industrialemployment).

37. The industry comprises 73 integrated plants, six grinding units, oneclinkerization unit, one white cement plant, and 26 mini cement plants witha total installed capacity of 42.6 million tons per year (TPY). About 58% ofthe total kiln capacity is based on energy-efficient dry or semi-dry processes,and the balance (34 plants) on wet-process technology. The average size of theplants is expected to increase from 535,000 TPY in 1984/85 to 650,000 TPY bythe end of the Seventh Plan period in 1989/90. The private sector owns 82Z ofinstalled cement manufacturing capacity and accounts for 86Z of total cementproduction. A few major industrial groups including Associated CementCompanies (ACC), Birla House, J.K. Singahnia, Sahu Jain, Bangurs and IndiaCements, control about 60% of the cenent production in the private sector. Thepublic sector accounts for about 14% of total cement production, of which theCement Corporation of India (CCI) accounts for about 6.6%, and eight StateGovernment-owned small companies account for the balance of 7.4%. Of theinstalled capacity, about 68% is located in the South and West regions of thecountry.

Subsector-s Performance

38. India's first cement plant was established in 1914, but the industrygrew slowly until a policy to protect infant industries was introduced in themid-1930s. By 1950/51, capacity had reached 3.5 million TPY, and reached 15million TPY by 1974. While capacity grew by almost 5.7Z per year, due tovarious infrastructure and input constraints, including a shortage of transpor-tation facilities and power supply and labor problems, output grew by only 1.5%per year. Since 1974 cement production has grown at an average rate of 7.4%per annum, and between 1982 and 1985, annual production increased from 21.1million tons to 30.2 million tons. During the Sixth Plan period (1980-85),rapid growth has been stimulated by changes in GOI-s policies with regard topricing, output control and distribution. Following the dual pricing systemintroduced in 1982, capacity utilization and production increasedsubstantially, imports decreased and the free market prices declined in realterms. Nevertheless, gaps remain between potential and actual production, andbetween supply and demand for cement. Although capacity grew by about 10% peryear during 1980-85, capacity utilization declined to about 72.7%, because of aunmber of factors including declining quality and quantity of coal, theshortage of electricity and railway wagons, labor and maintenance problems and"teething" problems with respect to the new and expanded units. In order tomimimize the problems caused by interruptions in power supply, the industry hasinstalled capt.ve power generation plants. However, due to the old age of thecement plants accounting for about 30% of the total installed plant capacity,low capacity utilization persists. In addition, the problems associated with

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the use of high ash coal have been aggravated by these old plants vhich arebased on wet process technology.

Costs and Viability

39. Notwithstanding the above problems, the subsector is an ect.i-aicproducer of cement. The 1985 investment cost of a plant with a capa-ity of onemillion TPY is estimated at US$90-120 per annual ton of cement in India,compared with US$170-200 internationally. The average operating costs of theIndian plants estimated at US$30 per ton of unbagged cement are comparable tocosts in some European countries including France, West Germany and the UnitedKingdom. However, India's comparative advantage vith regard to operatingcosts, deriving from the low price of coal as well as low wage rates, is fasteroding, particularly for the old wet-process plants. In order to avoidfurther deterioration, India must modernize the existing plants and equipmentand upgrade operator skills.

The Indian Cement Market

40. SUpDly and Demand. Cement has been continuously in short supply inIndia over the last two decades. While a part of the shortfall has been metthrough imports, a large unsatisfied demand continues to exist. The gapbetween supply and demand has been narrowing, however, since the Governmentsintroduced decontrol measures. Indeed, some government agencies project aslight excess in supply in the near future. The Bank's estimates hawever,indicate that the cement shortage will continue into the next decade althoughto a lesser extent.

41. Distribution and Pricimu. At present the Government partially controlsthe distribution and pricing of cement, but it is steadily moving toward sub-stantial decontrol. Under the dual pricing system introduced in 1982, cementmanufacturers are required to sell a specific portion of their production tothe Government at a fixed (levy) price; the balance may be sold at the openmarket price. The price formula was intended to assure the cement industry apost tax return of 12% on net vorth. The levy cement is allocated and dis-tributed to different regions of the country by the Office of the CementController. A freight equalization system ensures a uniform levy pricethroughout the country. The present FOR levy price is Rs 1042/ton of OrdinaryPortland Cement (OPC), and Rs 1037/ton for other types of cement. Most of thelevy cement is for the Central and State goverrments~ projects. The levy pricewas to be adjusted periodically in line with changes in the costs of inputs.Since 1982, GOI has progressively increased the levy price and reduced the levyshare from about 61% to under 50% of the total production, thereby bringing theaverage price to about 90% of the current border price.

42. The price of non-levy cement is determined by the cement manufacturerswho adhere to voluntary price restraints. The basic consideration is that theaverage ex-factory price-levy plus non levy, should provide a manufacturer a12Z post tax return on average networth. In this context, a ceiling was set atRs 1,380/ton (including excise duty of Rs 225/ton) in Kerala, Maharashtra, GOA,Jasu and Kashmir and the Northeasteria States, and Rs 1,280/ton in all theother states. Hlowever, due to seasonal variations in demand and distributionbottlenecks, price levels have risen to as high as Rs 1,700/ton in some urbanareas. Cement is sold through stockists functioning both as retailers and as

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wholesalers. However, as increasing amounts of cement become available in thefree market, manufacturers have begun to appreciate the need to establisheffective marketing and distribution facilities to smooth out short-term priceswings, capture and retain market share and reach new segments of consumers.

43. Cement imports have been handled by the State Trading Corporation (STC)which is the only body now authorized to import cement. The price of recentimports has been around US$50/ton, which, after a 15Z import duty and an exciseduty of Rs 205/ton, retails at Rs 1,200/ton. Large increases in imports wouldbe difficult to handle by the existing distribution systems, and until bulkfacilities are available, imported cement can only have a marginal effect onthe overall supply-demand balance and pricing.

44. As already stated, GOI's longer-term objective is substantial decontrolof the cement industry. However, in order to minimize the budgetary impact andpartly because of the need for time to modernize their plants and become morecompetitive, and improve marketing and distribution systems, GOI has decided todecontrol progressively. It intends to continue to review its policies fromtime to time in order to effect further and progressive liberalization ofdistribution and pricing. GOI has agreed to: (i) a steady reduction in thequantity of cement subject to levy; (ii) continue to raise the levy price untilit is equated with the market price; and (iii) exchange views with the Bankregarding progress on achieving the policy objectives in the cement subsectorduring the Seventh Plan period. Simultaneously, the industry must address thefollowing problems: Ci) obsolete cement plants and equipment; (ii) outdatedand inefficient wet process technology in respect of 42Z of the installedcapacity; (iii) lack of effective marketing organization and distributionsystems; (iv) inadequate attention to product quality; (v) poor coal qualityand its effect on management of the limestone resource base; and (vi) lack ofindustry-wide operator training programs. Priority needs include upgrading ofthe old plant facilities and operator training-the focus of the proposedproject. The issue of coal quality which has a direct bearing on the manage-ment and operating life of existing limestone reserves is being addressedthrough the ongoing Bank assisted program of modernization in the coal sector.As the market becomes increasingly competitive, the need to improve the market-ing and distribution system is being addressed by the industry by trainingpersonnel and establishing the required facilities. Sufficient incentiveswould be available under the Governent's policy to deregulate of prices toaccelerate this trend and to allow for substantial improvements in the area ofmarketing and distribution. Finally, GOI is aiming at improving the efficiencyof the units owned by the various state Governments so that they can alsoattain industrywide standards of performance.

Bank Grou, Involvement

45. Following our 1980 subsector study, the Bank has pursued an activedialogue with GOI, culminating in the preparation of the proposed project(Para 39). Bank involvement has contributed to the design and structuring ofthe project including the proposed procurement arrangements (ICB). The IPCmade its first investment in the cement subsector in 1981, when it financed agreenfield plant for Coromandel Fertilizer Limited. Since then it hassupported other greenfield plants as well as major expansions for the IndianRayon Corporation Ltd., Modi Cements Ltd., Gvalior Rayon Silk ManufacturingCompany, and Larsen and Toubro Ltd. In addition, IFC has assisted in arranging

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financing for expansion and large-scale greenfield plants for new entrants inthe cement industry. The IFC assistance covers about 4 million TPY of cementmanufacturing capacity expected to be fully operational by 1990, representingabout 101 of present installed capacity. The IFC's further involvement in thesubsector is limited because its cement portfolio now represents about 32% ofIFC's total exposure in India. The justification for Bank involvement isdetailed below (Para 48).

PART IV - THE PROJECT

Backs round

46. The project was appraised in May 1985. Negotiations were held inWashington in December 1985 with the Indian delegation coordinated byMr. Malhotra of the Government of India's Department of Economic Affairs,Ministry of Finance. The Staff Appraisal Report (No. 5901-IN) datedDecember 23, 1985 is being circulated separately. A supplementary data sheetis attached as Annex III.

Proiect Objectives and Rationale for Bank Involvement

47. The project's primary objectives are to: (i) improve the operatingefficiency of old wet-process cement plants by conversion to the modern, dryprocess; (ii) implement improvements in fuel efficiency, product quality,environmental control, labor productivity and marketing and distributionsystem; and (iii) upgrade plant operator skills. Over the past five years, theBank and GOI have been involved in an extensive dialogue regarding the cementindustry on the basis of the Banks 1980 comprehensive cement subsectoranalysis. Its Report (No. 3141-IN) recommended, inter alia, that (i) theproduction and pricing of cement be gradually decontrolled; (ii) technology beupgraded; and (iii) product quality be improved. During the past three years,the Government demonstrated its willingness to decontrol the cement industry byinstituting substantial changes in the cement pricing mechanism and in tariffsapplicable to machinery for manufacturing cement. The Government has agreedto further decontrol cement prices and production.

48. The rationale for Bank involvement in the cement subsector is twofold:it would assist the Government in bringing about further progress in pricingpolicy and tariff reforms to promote efficiency in the subsector. It wouldenable it to realize its long-Term growth potential in the cement industry byintroducing modern, energy-efficient manufacturing technology. Bank involve-ment in this project now would confirm that, where the environment is conduciveto efficient and competitive operations, the Bank could actively support theGovernment in its efforts to modernize and expand capacity. The focus of theproposed project is consistent with the Bank's strategy for the industrysector, which supports the goal, inter alia, of productive investments incritical industries, and other measures to enhance efficiency and facilitateindustrial growth. The focus of the proposed project is consistent with theBank's strategy for the industry sector, which supports the goal, inter alia,of productive investments in critical industries, and other measures to enhanceefficiency and facilitate industrial growth.

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49. The project would finance (i) conversion of six private sector cementplants (Associated Cement Companies' Madukkarai and Shaiabad plants, Birla Juteand Industries Ltd. Satna plant, India Cements Ltd. Sanlcarnagar Plant, KCP'sMacherla Plant and Sri Digvijay Cement Company Sikka Plant), and one publicsector plant (Cement Corporation of India Mandhar Plant) from the inefficientwet process technology, to a modern dry process precalciner technology;(ii) small scale rehabilitation and modernization investments of other cementplants; (iii) improvement of marketing and distribution systems; (iv) trainingand curricular development; and (v) technical assistance.

DETAILED FEATURES

Plant Conversion

50. ACC - Madukkarai Plant. The subproject would consist of convertingthe Nadukkarai plant located in Coimbatore district in Tamil Nadu from a wetto semi-dry process. Under the project, funds would be provided for theinstallation of two additional flotation cells for the limestone benificationplant, a new vacuum filter plant and a crusherldryer for dewatering of thekilnfeed, a new dry process kiln department (3-stage, preheater, with a ratedcapacity of 520,000 TmY), and a 6-MW diesel generator for captive powergeneration.

51. ACC - Shahabad Plant. The project would provide funds for convertingthe Shahabad plant located in Gulbarga district of Karnataka State from the wetto the dry process. One preheater, precalciner kiln would replace the oldkilnas, and the proposed plant would have a clinker capacity of 2,400 TPD(corresponding to 830,000 TPY of cement). The new kiln would operate at a coalconsumption of 850 Kcal/Kg clincker, and power consumption of 120 IWh/ton ofcement. The equipment to be procured would include a limestone crusher, anaerial ropeway for transporting crushed limestone, preblending facilities forlimestone, new dry process rawmill and kiln departments with dust collectionequipment, preblending facilities for coal, and a rotary cement-packingmachine. In addition, the existing 10-MW coal-fired power plant would beeither rehabilitated or replaced.

52. Birla Satna Plant. Under the project, Birla's plant located at Satna,in Madhya Pradesh, would be converted from the wet to the dry process. Threeexisting wet process kilns with a combined capacity of 1,750 TPD would bereplaced by a single preheater precalciner kiln with a rated capacity of 2,250TPD; thus the Satna plant's rated capacity would increase from 581,000 TPY to750,000 TPY, or by about 292. The major equipment to be procured would includequarry equipment, dry-process rawmill, kiln department with dust collectionand cement packaging machines, and a coalmill for kiln precalciner withassociated coal feeders and dust collection equipment.

53. CCI - Mandhar Plant. The subproject would consist of converting theMandhar plant located in Raipur district, Madhya Pradesh, from a wet to a dryoperation. The converted plant would have a rated clinker capacity of 1,200TPD and would produce 700,000 TPY of cement. It would operate at a fuelefficiency of 850 Kcal/Kg clinker, which would correspond to coal consumptionof 0.20 ton of coal per ton clinker. Power consumption would be 107 KWh/ton ofcement. The equipment to be procured under the project would include quarryequipment, limestone preblending facilities, new dry process ravmill and kiln

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departments with dust collection equipment, cement storage silos, and a rotarycement packing machine. The existing rawmills would be converted to cementmills.

54. ICL - Sankarnasar Plant. The project would provide funds for convert-ing the Sankarnagar plant located in Tirunelveli district, Tamil Nadu, from awet to a dry operation. The converted plant would have a clinker capacity of3,000 TPD, which would correspond to 1,042,000 TPY of cement. It would require850/Kcal/Kg clinker of coal, or 0.2 tons of coal per ton of clinker, and powerconsumption of 116/KWH/ton of cement. The equipment to be procured for thesubproject would include a limestone crusher, a limestene preblending system, anew dry process raw mill, and a kiln system with elecrrostatic precipitator forgas cleaning, clinkers storage silo, a rwt-=y ce=at packing machine, and a4-MW diesel-power generating plant.

55. KCP - Macherla Plant. Under the project, the Macherla plant, which islocated in Guntur district, Andhra Pradesh, would be modernized by replacingtwo present kilns with a new precalciner preheater kiln, and converting onerawaill to a cement mill. The modernized plant would have a kiln with acapacity of 1,200 TPD of clinker, which would correspond to 370,000 TPY ofcement. It would need 800 Kcal/Kg clincker of coal with a power consumption of120 KWE/ton of cement. The equipment to be procured would include quarryequipment, new dry-process ravmill and kiln departments, and two rotary cement-packing machines.

56. SDC - Sikka Plant. The project would finance the company's secondphase conversion of the Sikka Plant, located in Jamnagar district, Gujarat.The converted plant would have a clinker capacity of 1,770 TPD, an increase of38% from its existing capacity of 1,285 TPD. The existing wet process kilnwould be replaced by a dry kiln. Equipment to be procured under the projectwould include quarry equipment, limestone crushing plant, aerial ropeway, beltconveyor, limestone preblending system, a new dry process saw mill, a kilnsystem with electrostatic precipitator for gas cleaning , clinker storage silo,cement silo and rotary packing machine, a ceal mill for kiln precalciner andassociated coal feeders and dust collection equipment.

Inputs. Infrastructure and Environmental Impact

57. The Bank has fully appraised six of the seven conversion subprojectsand found Lhlere are adequate suitable raw materials and all the required inputsfor them. The seventh subproject (SDC-Sikka Plant) will be appraised by ICICIand IDBI with Bank participation on the basis of the criteria employed inrespect of the other six subprojects. The companies have been assured ofobtaining the incremental power needed. In addition, nearly all of the sub-projects provide for the installation of captive power generation plants whereneeded to guarantee continued operation during power outages. Attention wouldbe given to environmental concerns and in this regard, all subprojects areexpected to purchase and install pollution control equipment and to meet allexisting pollution standards, which are acceptable to the Bank. In addition,the project would finance development of distribution facilities, transportequipment for bulk cement handling, modern instrumentation and control systems.

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Small-Scale Modernization and Rehabilitation at Other Cement Plants

58. The project would provide funds for a line of credit of US$35 millionto ICICI to finance the estimated foreign exchange requirements for small-scalemodernization, rehabilitation, energy conservation, environmental control, andbalancing schemes at existing plants other than the seven conversion sub-projects described above and for development of improved marketing anddistribution system. This would cover the acquisition of software for processcontrol, installation of modern instrumentation and control systems, energysaving devices, dust collection equipment, balancing equipment, distributionfacilities, transport equipment for bulk cement handling and technical assis-tance to improve operations and management. This credit would help companiesacquire advanced technology and know-how with respect to modern operations andthereby enable them to improve productivity, fuel efficiency, and environmentalcontrol in their plants. ICICI would identify and appraise the subprojects,and the appraisals vould be submitted to the Bank for review and approval. Theaverage subproject size would be about US$10-15 million equivalent, and theaverage subloan would be about US$5-8 million. ICICI would submit to the Bankfor review appraisal reports for all subprojects whose funding from theproceeds of the loan exceed US$6 million equivalent, before it agrees to fundsuch subprojects. The total financing required for the program over a 2-3 yearperiod is estimated at about US$89 million, and the proposed line of creditwould cover about 40Z of the total financing required.

Training and Technical Asssistance

59. With the rapid expansion and technological changes that are occurringin the cement industry in India, the existing shortage of skilled plantoperators has become even more acute. Therefore, under the project, fundswould be provided for training and technical assistance. In particular, ACCand CCI would be assisted in: (1) improving and upgrading their trainingfacilities (this would include purchasing modern training equipment and relatedsoftware); (ii) constructing new dormitory facilities; (iii) designing trainingprograms; and (iv) training trainers. About 6 man-years of technical assis-tance would be provided for this purpose. In addition, the project wouldfinance management assistance and training needs for the six companies under-taking conversion subprojects. The management assistance would consist ofreviewing technical specifications, evaluating bids, supervising detailedengineering design, and overall project management. About 150 man-months oftotal consultant assistance would be provided. ICICI and IDBI would ensurethat the companies would employ consultants on the basis of a work programsatisfactory to the Bank; consultants would be employed in accordance with Bankguidelines and their terms and conditions of employment would be satisfactoryto the Bank. Terms of reference for the consultants have been agreed with theBank and selection of consultants is at an advanced stage.

60. At the subsector level, under the sponsorship of the CementManufacturers' Association (CMA), consultants would assist in preparing amanpower development strategy for the cement industry covering manpower needs,training requirements, and a plan for medium- and long-term manpowerdevelopment. The consultants would propose the actions needed at eachindividual company and industry-wide in order to upgrade existing skillls torespond to changing technology. The actions would include, inter alia, train-ing new personnel at pre-entry and post-entry stages, developing suitable

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curricula and upgrading training facilities in existing academic institutionsand new training centers to be established by the industry. The strategy studywould be completed by December 31, 1986. Terms of reference have been agreedand consultant selection is underway. The existing regional technical traininginstitutions in India would also be assisted in developing curricula specifi-cally related to the industry's urgent manpower needs, particularly withrespect to maintenance personnel, plant operators, and first-level supervisors.A total of 50 man-months of expert assistance would be provided for thisreason. In addition, some training equipment and teaching aids would beprovided. The equipment lists would be subject to prior Bank review andapproval.

ManaRemrent and Implementation

61. Both ICICI and IDBI are well managed institutions, capable ofimplementing the project as assigned. The participating companies haveemployed consultants to help formulate the project, evaluate bids, prepareconstruction drawings, and manage construction. The consultants and most ofthe cement companies have up-to-date knowledge and experience in cement plantdesign and construction. All the companies have increased their staff ofengineers and skilled personnel in order to facilitate project start-up andensure smooth implementation. Personnel selected to operate the new machinerywill be trained mostly in India but also overseas.

62. All the companies have historically been strong financial performers,have had sound capital structures and the project is expected to enhance evenfurther both their competitiveness and profitability. Except for CCI (aGovernment company), all the companies are actively traded in the stock market,and are considered very attractive for both institutional and individualinvestors. Even CCI has been able to raise funds in the financial marketsthrough public debenture issues, which have been oversubscribed.

Proiect Costs and FinancinR

63. The total project cost is estimated at US$469.8 million equivalent,including taxes and duties estimated at US$55 million equivalent. The foreignexchange component is estimated at US$211.1 million, or 45% of the totalproject cost. Physical contingencies were estimated at 10% of base costs forcivil works and certain categories of equipment. However, only a 5% contin-gency has been applied for most equipment and machinery. Price escalationamounts to an average of 14.3% on the base costs plus physical contingencies,and reflects the wide mix of project implementation schedules. Bank guidelinesfor international and domestic price escalation have been followed. Expectedinflation rates for foreign goods and services are 7% in 1986 and 1987, 72 in1988, 7.5% in 1990 and 4.5% in 1991 and 1992; for local goods and services therates are 7% in 1986, 7.5% in 1987-90 and 5% in 1991 and 1992.

64. The Bank loans of US$200 million would cover about 43% of the totalproject cost, net of taxes and duties. GOI, ICICI, IDBI, and the projectsponsors would contribute the balance of the required project financing.

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Onlendina Terms

65. Bank assistance would cover three specific components for which termswould differ: (i) conversion subprojects; (ii) mall-scale modernization andrehabilitation; (iii) technical assistance and training. Of the proposed Bankloan of US$165 million equivalent to GOI, US$163.5 million equivalent vould beonlent to ICICI and IDBI in equal proportions for financing major conversionsin seven plants, as well as company specific technical assistance and training.ICICI and IDBI would conclude subloan agreements that would include provisionsfor: ti) adequate cost overrun financing; (ii) maintenance of financial posi-tion and capital adequacy ratios; and (iii) limitations on assumption of newdebt. Repayment from ICICI and IDBI to GOI would be over 20 years including agrace period not exceeding five years. Standard GOI rates of interest forloans to financial institutions (currently 10.25Z per annum) would apply.Loans from the institutions to subborrovers would be on prevailing rates ofrupee loans (currently at 14Z). GOI would assume the exchange risk. Signingof subsidiary Loan Agreements between GOI and ICICI and IDBI for the use offunds earmarked for conversion subprojects, would be a condition of effective-ness of the Bank Loan to GOI. GOI would pass on to ICICI US$1.5 million as anonreimbursable grant to finance training and technical assistance at thesubsector level. Signing of a Grant Agreement between GOI and ICICI for theuse of funds earmarked for training and technical assistance, would also be acondition of effectiveness of the Bank Loan. To ensure the maintenance of asound financial position, the companies would maintain a current ratio of notless than 1.2 times and a debt/equity ratio not greater than 67:33. Inaddition, the companies would not incur additional debt, if to do so wouldcause their debt/equity to exceed 67:33 or its projected debt service coverageto fall below 1.5 times.

66. The proceeds of the direct Bank loan (US$35 million) to ICICI would berelent to subborrovers on standard ICICI credit terms varying from 7 to 10years for repayment with up to 2 years of grace. The interest rate would bethe variable IBRD rate plus 2Z per annum. The subborrowers would bear theforeign exchange risk.

Procurement and Disbursement

67. Annex IV summarizes the manner in which items would be procured underthe project. The Bank's international competitive bidding (ICB) procedureswould be used for all goods financed by the Loan to GOI; prequalification wouldbe used for major equipment packages. A preference margin of 15Z, or theapplicable rate of customs duties if lower, would be allowed to domestic equip-ment suppliers in evaluation of bids received under ICB. Under the majorconversion component, the Bank has already identified and agreed with eachsubproject sponsor, the bidding packages for items to be procured under ICBprocedures and most sponsors have completed the prequalification procedures.To ensure compatibility with existing facilities, a small amount (less thanUS$3 million) of equipment would be procured on the basis of internationalshopping. This equipment would consist of diesel generating sets for the ACCplants, and other miscellaneous items. Most major packages would includesupervision of erection/installation to ensure satisfactory performance, and insome cases may include a limited "turnkey" bid covering erection/installationand engineering. Civil works would not be included in any of the proposedequipment supply/erection packages. The agreement with the five sponsors of

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the conversion subprojects, for which appraisals have been completed, covers atotal of 54 packages at a combined base cost of US$106 million equivalent; ofthese, 4 packages at a total base cost of US$43.4 million (or 41Z of all ICBpackages) each exceed US$5 million equivalent in base costs, and another 14packages at a combined total base cost of US$31.2 million equivalent (or 29% ofthe total) each exceed US$1.5 million equivalent. The remaining pa Gagesaverage a base cost of US$1 million equivalent and may be bid sing.y ur may begrouped at the bidder's preference. The packages are sufficiently attractiveto stimulate interest among foreign bidders. The bidding packages for Sikkaplant to be appraised later, are expected to follow a similar pattern.Consultant services would be procured following IBRD guidelines. Local biddingprocedures used in other line-of-credit operations with ICICI are satisfactoryto the Bank, and would be followed for the small-scale modernizations andrehabilitation component under the direct loan to ICICI; only the direct for-eign exchange content of equipment purchases for this component would befinanced by the Bank loan. A very small amount of retroactive financing(US$1.5 million), amounting to about 1% of the proposed loan, would be providedunder the loan to GOI to enable the companies to engage foreign consultants intime to assist with the preparation and review of technical bids, and wouldcover expenditures incurred after July 1, 1985.

68. The proceeds of the loans would be disbursed as follows: (a) lOOZ offoreign expenditures and 100Z of local ex-factory cost of agreed ICB packagesfor major conversion activities and training and technical assistance at sub-sector level; (b) 100% of foreign expenditure of small-scale rehabilitation andmodernization; (c) 100% of foreign and 60% of local expenditure for plant-leveltechnical assistance; and (d) 1002 of total expenditures for plant-leveltraining. Documentation in support of payment claims relative to contractsbelow US$1.5 million in the case of Part A and US$800,000 in the case of Part Bof the project would not be required, as these would be covered by statementsof expenditure. The disbursement schedule has been based on the standardprofiles for the Region and in the industry. Signing of acceptable subloanAgreements by ICICI and IDBI with each of the companies sponsoring the conver-sion subprojects would be a condition of disbursements.

Accounts and Audit

69. The sponsoring companies would submit on a timely basis, audit reports,periodic progress reports and financial information concerning the project.ICICI and IDBI would also provide annual audit reports, project progressreports and financial information. After project completion, each company andfinancial institution would prepare and furnish to the Bank a project comple-tion report within six months of the project closing date.

Benefits Justification and Risks

70. The project's main benefit would be increased production of cement at amuch reduced fuel consumption level. At full production, the incrementaloutput of the project is expected to be about 1.8 million tons or 3.1% ofprojected total domestic demand. The project would therefore help to reducethe shortage of a key commodity, which in the past has been a critical con-straint to the development of India's economy. Fuel consumption would decreaseby an average of about 42% for the seven subconversion projects. Furthermore,the project is expected to generate substantial additional employment iu thedomestic equipment manufacturing industry, the cement manufacturing industry,

-21-

and the construction industry. Finally, the project would have a positiveenvironmental impact because all the converted and modernized cement plantswould be provided with efficient dust collection equipment which would meet thenational environmental standards.

71. The overall economic rate of return is estimated at about 25%. Theindividual rates of return for the subprojects range from 21% for Madukkarai(ACC) to 511 for Macherla (KCP). The results of the sensitivity analysiscarried out with regard to key assumptions including a decrease in borderpricing, capital cost increases and delays in project implementation; indicatethat only very large and highly unlikely deviations would make the projecteconomically unviable.

72. The project faces no major risks. However, inadequate implementationcapability could delay project implementation. The risk has been minimizedbecause all the companies involved have already assembled competent staff andhave retained qualified and experienced consultant engineers to assist in mostphases of project implementation. Moreover, she construction would take placeat the existing plants with infrastructure already in place. In the past thelack of continuous and adequate power prevented companies from attaining therated output. This risk has now been largely overcome by the installed captivepover-generating capacity. A shortage of coal and transport facilities remainsa potential risk. However, projects designed to improve railway capability,and hence coal haulage, are under execution. In addition, the fuel savingsresulting from wet to dry conversion would also reduce the demand for coal andenable the companies to perform better with the present level of coal.Finally, should price decontrol measures be implemented more slolwy than hasbeen assumed, the companies internal cash generation could be reduced.However, these companies are in a strong financial position. Furthermore, thefuture retention price expected after full decontrol is only about 18% higherthan the average price under the existing controls. Moreover, the bulk of theincremental benefits are expected to emanate from more efficient fuel use. Therisk regarding price decontrol is therefore minimal.

PART V - RECOMMENDATION

73. I am satisfied that the proposed loans would comply with the Articlesof Agreement of the Bank, and recommend that the Executive Directors approvethe proposed loans.

A.W. ClausenPresident

Washington, D.C.February 14, 1986

ANNEX 1T A a A L S 3 Page 1 of 6

lNDIA - SOCIAL XICICATIJAN DATA 511tHINDIA WBIEM GROUPS CWIWCHED AVCkACZS) is

1ST (lUST RECENT SsTSIATE) /bMCKEE? LOW INCSt MIDDLE INC

196i,o 19701k KSTUIArl ASIA & PACIFIC ASIA & PACIFIC

ARE CTUOSUS EQ. *)TOTAL 3287.6 3267.6 3287.6ACRICILTTRAL 1763.5 1780.5 1111.4

OUR PER WET (t .. .. 260.0 278.3 1011.1

u1_r musasnaw Cen(CSILOQA aF OIL EQUIVALENTJ 79.0 113.0 156.0 285.7 5b6.8

nwwana A vna sTnSIPOPULATIOU.rO-YEAR CTIODUSA ) 434849.0 547569.0 733248.0URM POPULATION tS OF TOTAL) 18.0 19.6 24Z4 22.3 35.9

POPUILATION PROJECTIONSPOPULATION IN YEAR 2000 (MILL) 9Y4.4STATIONAY POPULATION C1IL1) 1700.0POPULATION IfHENhUM 1.8

POPULATION DEoSnPER Sq. IDI. 132.3 166.6 223.0 173.8 386.9PER SO. E1. ACIT. LAND 246.6 307.5 395.8 353.3 1591.2

POPULATION ACE STRiCTURE (CZ0-14 YRS 40.8 42.7 39.5 38.3 3S.2

15-64 IRS 54.4 54.1 56.5 59.4 57.765 SD AIOVE 4.6 3.0 3.9 4.3 3.5

POPULATION CRO11 RATE (S)TOTAL 1.8 2.3 2.2 2.0 2.3URbN 2.5 3.3 3.9 4.1 4.1

CIOE UIRTN RATE (PER THOUS) 47.7 41.5 33.9 27.5 30.1CRUDE OEATH RATE (PER TouS) 23.9 17.9 12.5 10.2 9.4CROSS REPRODOCTION RATE 2.9 2.8 2.3 1.7 I.Y

FAKrLY PUNNLINCACCFPTORS. ANtNUAL (THOUS) 64.0 3782.0 6828.0 ICUSERS (S OF MARED E) * 11.7 32.0 49.4 56.5

Pl a sA znlOiINDER OF FOOD PROD. PER CAPITA(1969-71-100) 98.0 102.0 113.0 116.6 124.4

PER CAPITA SUPPLY OFCALORIES (1 OF RSQUIIMlWTS) 98.0 91.0 92.0 106.3 115,7PROEINS (CGRAIS PER DAY) 56.0 50.0 50.0 60.1 60.3

oF Wtic AIMAL AND PULSE 17.0 15.0 13.0 Id 14.4 14.1

NILD (ACES 1-4) DEATH RATE 26.3 19.7 11.0 7.3 7.2

RIMLTSLIFE ErPEL.- AT DIRTS C(ARs) 42.2 47.3 54.9 60.5 6U.6INFANT OR. RATE (PER THOUS) 165.0 139.0 93.0 69.2 64.9

ACCESS TO SAFE UATR (SPoP)TOTAL . 17.0 41.0 Ic 44.2 46.0URAN .. 60.0 77.0 7W 77.2 57.6RDRAL *- 6.0 31.0 /c 34.6 37.1

ACCESS TO EXCRETA DISPOSAL(2 OF POPULATIOS)

TOTAL *- 18.0 6.0 Ic 7.8 504.1URNS .. 5.0 27.o 7- 28.8 52.9RURAL .. 1.0 1.0 7T 5.5 44.7

POPULATION PER PHYSICIAN 4850.0 4890.0 3690.0 le 3318.0 7751.7POP. PER NUING PERSON 10980.0 If 7420.0 5460.0 7e 4690.7 2464.8POP. PER HOSPITAL BLD

TOTAL 2180.0 1650.0 1290.0 /c IU39.2 1112.1URAN .. .. 370.0 7 299.1 651.4RURAL .. .. 10410.0 1i 6028.2 259.9

AD!IISSIOIS PER HOSPITAL SEW .. .. .. 52.3 41.1

lBOIS7MAVERArE SIZE oF HOUSEHOLD

TOTAL 5.2 5.6URBAN 5.2 5.6RURAL 5.2 5.6

AVERAGE NO. OF PERSDNS/ROOhITOTAL 2.6 2.8URANS 2.6 2.6RURAL 2.6 2.6

PERCENTAGE OF DUELLINS WIH "LCT.TOTAL ..

URBA ...RURAL ..

ANNE 1T A B L E 3A Page 2 of 6

INDIA - SOCIAL INDICATORS DATA SHEETINDIA REFRENCE RUPS (WEIGII AVERACS T) /a

hOST (MOST RECENT ESTIMATE) lbR llglENT LOW 1m100 MDLE INCOME

1 9 6 9b 1 97 n/b EST, TE_ ASIA & PACIFIC AStA & PACIFIC

MuCATI-ADJUSTD roLLME RATIOSPRIMARY: TOTAL 61.0 73.0 79.0 /c 92.6 100.7

MALE 80.0 90.0 93.0 7;7 105.5 104.4FEMALE 40.0 56.0 64.0 Weh 79.3 97.2

SECONDARY: TOTAL 20.0 26.0 30.0 Ic 31.3 47.8KALE 30.0 36.0 39.0o7W 40.8 50.6FEKALE 10.0 15.0 20.0 7-' 21.9 44.8

VOCATIONAL CZ OF SECDNIA) 2.8 1.0 .. 3.2 18.4

PUPIL-TEACHER RATIOPRMRT 46.0 41.0 54.0 /c 38.0 30.4SECONDY 16.0 21.0 .. 17.4 22.2

PASSENEIR CARS/THDUSAWD POP 0.6 1.1 1.4 /h 0.1 10.1RADIO RCEZVERS/THOUSAND POP 4.9 21.5 55.8 129.8 172.9TV RECZIVERS/T1USAND POP 0.0 0.0 2.9 19.8 58.5NEWSPAPEL ( 'DAT GENCEtAL

INTEREST") CIRlATONPER THOUSAND POPULATION 10.6 16.2 19.4 /h 25.7 65.3

CINEMA ANNUAL ATTENDANCE/CAPITA 3.2 6.2 6.6 6.0 3.4

TOrAL LABOR FORCE (TEOUS) 185951.0 Z19194.0 284251.0FEMALE (PERCENT) 30.7 32.5 31.4 33.2 33.6aGRICULTURE (PERCENT) 74.0 74.0 71.0 /c 69.6 52.2XNDUSTRY (PECENT) 11.0 11.0 13.2 7T' 15.8 17.9

PARTICIPATTON RATE (PERCENT)TOTAL 42.8 40.0 38.3 41.9 38.9MALE 57.0 52.4 51.7 53.6 50.8FEMALE 27.3 26.9 25.3 29.1 26.8

ECONOMIC DEPENDENCT RATIO 1.1 1.1 1.1 1.0 1.1

INCONE DISTIUTIUPERCEN OP PRIVATE INCOMERCIVED BI

HICNeST 51 OF BW1SEHOLDS 26.7 26.3 / .HIGST 20Z OF IOUSE8OLDS 51.7 48.9 7 .. .. 48.0LOST 201 OF HUSEHOLDS 4.1 6.7 7i ' 6.4LOWST 405 OF 8WSE3OLDS 13.6 17.2 7i .. .. 15.5

POPERr T1 GROWSESTIATlED ABSOLUTE POVERTY INCOMELEVm (sS PER CAPITA)URBN .. .. 132.0 /h 133.9RURAL ' ' 114.0 7r 111.6 151.9

ESTIIMAED REATIE POVERTY INCOMELEVEL (US$ PER CAPITA)

URBAN .. .. .. .. 177.9RUL .. .. .. 61.7 164.7

ESTIDM POP. BELOW ABSOLUTEPOVERTI DCAM LEZVEL (;)URBAN .. .. 40.3 /h 43.8 23.5RULAL ., .. 50.7 Th- 51.7 37.8

NOT AVAILABLENOT APPLICABLE

N OTES

/a The group averae. for each indicator are population-weghted aritmetic _man. Coverage of countriesamog the indieatorn deends on availability of data and Is not uniform.

lb Unless otbarvire noted, "Data for 1960" refer to any yer between 1959 and 1961; 'Data for 1970" between1969 and 197'; and data for "Kost Recent Ratimate" between 1981 and 1983.

/c 1980; /d 1977; /a 1978; /f 1962; /g 1976; /h 1979; /i 1964-65.

JUN, 1985

ANNEX 1~~~~~~~~~~~ - P~~~~~~~~~kage 3 of 6

DEFINMONS OF SOCIAL INDICATORSNote Although thedatima drawn from souns generlly judged the most muthoritativeand reliable it should alwo be noted that they may nol beainrnatuonallycomparable because of the lack of standerdized dfiniions and concepts used by different coun tnc in ollcting the dst. Th data are nonetheless. ucfiul todescribe orders ofmagnitude. indicatc trends, and characterize cenain major diffnences betwecn countrics.The rcference groups are (1) the same country group of ihe subject country and 12) a country group with somewhat higher average income than the counlrygroupofthe subjectcountry (exccpt for -High Income Oil Esportcrs group wher-Me iide Income Nortb Afrnc and Middle Eas-i isLhoseo becauscofstrongersoio-culturml affinities). In the refcrence group data the averags are population weighted arithmetic mcans for ecah indicator and shown only when majorityofthe countries in agroup has data for that indicator Since the coverage of countries among the indicatorsdepends on the availabilitv of data and is not uniform.caution must he exercised kn relatingaverageofone indicator to another. These averges are only useful in comparing the valueofone indicator at a timcamongthe country and reference groups.

AREA (thousand sq.km.) Cnde Birth Rate (per rhaand)-Number of live births in the yearTotal-Total surface area comprising land area and inland waters; per thousand of mid-year population. 1960. 1970. and 1983 data.1960. 1970 and 1983 data. Crude Death Rate (per thousandJ-Numlber of deaths in the yearAgricutur-l-Estimate of agricultural area used temporarily or per thousand of mid-year population; 1960. 1970. and 1983 data.permanently for crops, pastures. market and kitchen gardens or to Gross Reprodeaetion Rate-Average n umber of daughters a womanlie fallow. 1960. 1970 and 1982 data. will bear in her normal reproductive period if she experiences

present age-specific fertility rates; usually five-year averages cndingGNP PER CAPITA (USS)-GNP per capita estimates at current in 1960. 1970. and 1983.market prices, calculated by same conversion method as World Fomily Planinzq-Acceptors. Ausal (thowsnds. Annual num-Bank Atlas (I1981-83 basis). 1983 data ber of acceptors of birth-control devices under auspices of national

ENERGY CONSUMPTION PER CAPITA-Annual apparent family planning program.consumption of commercial primary energy (coal and lignite. Fandly Pla,ing-Users (percent ofmarried won:nJ - The percen-petroleum. natural gas and hydro-. nuclear and geothermal celc- tage of married women of child-bearing age who are practicing ortricity) in kilograms of oil equivalent per capita. 1960. 1970. and whose husbands are practicing any form of contraception. Women1982 data. ofchild-bearing age are generally women aged 15-49. although for

some countries contraceptive usage is measured for other agePOPULATION AND VITAL STATISTCS groups.Total Popaion, Mid- Year (thousads)---As of July 1; 1960. 1970. FOODAND NUTRITIONand 1983 data. FO N URrO

index ofFoodPrioction PerCapita (1969-71= 100j- Index of per.6 Popdat.vpercewoftotal - Ratioorurbantoto capita annual production of all food commodities. Production

population; different definitions of urban areas may affect compar- excudes animal feed and see for agriculture. Food COMModitiesability of data among countries: 1960. 1970. and 1983 data, include primary commodities (e.g. sugarcane instead of sugar)Populatio Projectis which are edible and contain nutrients (e.g. coffee and tea arePopdulation in year 2000-The projection of population for 2000. excluded): they comprise cereals. root crops. pulses. oil seeds.made for each economy separately. Starting with information on vegetabies. fruits. nuts. sugarcane and sugar beets. livestock, andtotal population by age and sex. fertility rates, mortality rates, and livestock products. Aggregate production of each country is basedinternational migration in the base year 1980. these parameters on national average producer price weights. 1961-65. 1970. andwre projected at five-year intervals on the basis of generalized 1982 data.assumptions until the population became stationary. Per Capita Supply ofCaloris (percent of requrentenrs -Cornput-Stationarr population-Is one in which age- and sex-specific mor- ed from calorie equivalent of net food supplies available in countrytality rates have not changed over a long period, whik age-specific per capita per day. Available supplies comprise domestic produc-fertility rates have simultaneously remained at replacement levei tion. imports less exports, and changes in stock. Net supplies(net reproduction rate= 1). In such a population. the birth rate is exclude animal feed. seeds for use in agriculture. quantities used inconstant and equal to the death rate. the age structure is also food processing. and losses in distribution. Requirements wereconstant. and the growth rate is zero. The stationary population estimated by FAO based on physiological needs for normal activitysize was estimated on the basis of the projected cha:racteristics of and health considering environmental temperature. body weights.the population in the year 2000. and the rmie of decline of fertility age and sex distribution of population, and allowing 10 percent forrate to replacement level. waste at household level; 1961. 1970 and 1982 data.Population Momentwnm-Is the tendency for population growth to Per Capita Sapply of Protein (ram per dayJ----Protcin content ofcontinue beyond the time that replacement-level fertility has been per capita net supply of food per day. Net suppiv of food is dcfinedachieved; that is. even after the net reproduction rate has reached as above. Requirements for all countries established hv USDAunity. The momentum of a population in the year r is measured as provide for minimum allowances of 60 grams of total protein pera ratio of the ultimate stationary population to the population in day and 20 grams of animal and pulse protein. of which 10 gramsthe year t. given the assumption that fertility remains at replace- should be animal protein. These standards.are lower than those ofment lcvcl from year t onward. 1985 data. 75 grams of total protein and 23 grams of animal protein as anPopulation Density average for the world. proposed by FAO in the Third World FoodPer sqkn.--Mid-year population per square kilometer 1100 hec- Supply: 1961. 1970 and 1982 data.tares) of total area: 1960. 1970. and 1983 data. Per Capita Protein Supply From Anrimal and Pulse- Protein suppl)Per sqkm. agracultural land- Computed as above for agricultural offood derived trom animals and pulses in grams per day: 1961-65.land only. 1960. 1970. and 1982 data. 1970 and 1977 data.Popnltim Age Structure (percent)-Children (0-14 vears). work- Child qa'er1 1-4 Death Rate (perthousand) - -Number ofdeaths ofing age (15-64 years). and retired (65 years and overl as percentage children aged 1-4 years per thousand children in the same ageor mid-year population: 1960. 1970. and 19$3 data. group in a given year. For most developing countries data derivedFopulation Growth Rate (prcent)--oral-- Annual growth rates o f from life tables: 1960. 1970 and 1983 data.total mid-year population for 1950-60. 1960-70. and 1970-83. HEALTH

Popuwaion Growth Rate (percent)-urban -Annual growth rates Life Erpectancy at Birth (years)-Number of years a newhornof urban population for 1950-60. 1960-70. and 1970-83 data. infant would livc if prevailing patterns of mortalitv for ail people

ANNEX 1Page4of6

at the time of of its birth wer to Kay the same throughout its life; Pup -teacher Ratfo - primary, ad secondarp-Total students en-1960. 1970 and 1983 data. rolled in primury and secondary klve divided by numbes ofhbaw Mortmky Rate (per thosand)-Number of infants who die teachers in the corresponding levelsbefor reaching one year of age per thousand live births in a givenyeasr, 1960, 1970 and 1983 data. CONSUMPTIONAcces to Sefa Water (pereet of peabrim)-toiaJ ain, and 1 Paser Cars (per thoxsd popularlou)-Passenger cars comn-nral-Number of people (total, urban, and rural) with reasonable prise motor cars seating ls than deight persos; excludes ambul-access to safe water supply micludes teated surface waters or ances. hearses and military vehis.untreated but uncontaminated water such as that from protected Rado Recevers (per thrl d populatlen)-All types of receierborehoks, spnnps and sanitary wells) as percentages of their respec- for radio broadcasts to general public per thousand of population;tive populatons. In an urban area a public fountain or standpost excludes un-licensed receivers in countries and in years whenlocated not more than 200 metesP from a house may be considered rgistration of radio sets was in effect; data for recent years mayas being within reasonable aces of that house. In ru areas not be comparable since most countries abolished licensing.masonable access would imply that the housewife or members of the TV Reci (pp o receivers for broadcasthouelhold do not have to spend a disproportionate part of the day to genera p pe th op ulTi ecludes fnlcenedTVin fetching the fBnl' ae ed to gcnsaa public per thousand population: cxchudes unicanw etIVin fetching the family's water ui~*receivers in countries and in years when rgsration of TV sets wasAccess to Ereta Disposl (percent of popalation)-teora, mrban, i inegnect.

nd rral-Number of people (total. urban, and rural) served by in eexcreta disposal as percentages or their respective populations. Aewsipper Circua ,i (per thousand populaion)-Shows tie aver-Excreta disposal may include the collection and disposal, with or age circulation of daily geral interest newspaper." defined as awithout treatment, of human cxcreta and waste-water by water- penodl publcation devoted primarily to recording geeral news.bome systems or the use of pit privies abd similar instaUations. It is considered to be daily' if it appears at kast four times a weekPoplaion per Physidan-Population divided by number of prac- Cinea Annual Attendance per Capita per Year-Based on thetising physicians qualified from a medical school at university level number of tickets sold during the year, including admissions toPopiuadno per Nursing Person-Population divided by number of drive-in cinemas and mobile units.practicing male and female graduate nurse assistant nurses,practical nurses and nursing auxiliaries. LABOR FORCEPopukadon per osptal Bf-4ot;4 £'b. -d rura tulavio Total Labor Fore (thosand1s)-Economically active persons. in-total. urban. and rural) divided ty ther respective number of duding armed forces and unemployed but excluding housewives,(total,urban,and rurl) ~ rsPectiv num 0 students. etc., covering population of all ages. Defintions inhospital beds available in public and private. general and spedalizedhospitals and rehabilitation centers. Hospitals are establishments various countries are not comparable; 1960.1970 and 19S3 data.prmanendy staffed by at least one physician. Establishments prov- Femalpercenr)-Ferale labor force as percntage of total laboriding principaly custodial care are not included. Rural hospitals. force.however include bealdh and medical centers not permanendy staffed Ariuk-e (percen)--Labor force in farming, forestry, huntingby a physician (but by a medical assistant, nurse, midwife. etc.) and fishing as percentage of total labor force; 1960. 1970 and 1980which offer in-patient accominodation and provide a limited range data.of medical facilities, indusy (percenr)-Labor force in mining, construction, manu-Admissions per Hospital Bed-Total number of admissions to or facturing and electricity, water and gas as percentage of total labordischarges from hospitals divided by the number of beds. force; 1960. 1970 and 1980 data.

P Drtia Rate (percenu)-eoal,nak, andfeae-ParticpationHOUSING or activity rates ame computed as total, male. and female labor forceAvera ie of Househod (persos per household i-tot. Arbon. as percentages of total, male and female population of all agesandraral-Ahouseholdconsistsofagroupofindividualswhoshare respectively; 1960. 1970. and 1983 data. These are based on ILOWsliving quarters and their mnain meals. A boarder or lodger may or participation rates reflecting age-sex structure of the population. andmay not be included in the household for statistical purposes. long time trend. A few estimates are from national sourcs.Averae VNub of P-erss per Roonroeda, urb n, nd - Ecron c Dependency Ratio-Ratio of population under 15. andAverage number of persons per room in all urban. and rural 65 and over, to the working age population (those aged 1564).occupied conventional dwellings. respectively. Dwellings excludenon-permanent structures and unoccupied parts. INCOME DISTRIBUTIONPrcetage of Dweln with Elcnricity-4otl, ubab, ad rural- Percnae of Tota D iosab lncome (boh in cash ad kind)-Conventional dwellings with electricity in living quartes as percen- Accruing to percentile groups of households ranked by total house-tage of total. urban, and rural dwellings rcspectively, hold income.

EDUCATION POVERTY TARGET GROUPSAdjusted Enrolhne Ratios The following estimates are very approximate measures of povertyPfrirr school - total. mal and fenale-Gross total. male and levekl and should be interpreted with considerable caution.female enrollment of aD ages at the primary level as percentages of Estmated Absolte Poverty Income Leel ([USSper captra)-urbanrespective primary school-age populations. While many countries and rurab-Absolute poverty income level is that income levelconsider primary school age to be 6-11 years. others do not. The below which a minimal nutritionally adequate diet plus essentialdifferences in country practices in the ages and duration of school non-food requirements is not affordable.are reflected in the ratios given. For some countrics with universal Esimated Relative Poery hicome Lee (US per cpita)-wrhaneducation, gross enrollment may exceed 100 percent since some and rural-Rural relative poverty income level is one-third ofpupils are below or above the country's standard primary-school average per capita personal income of the country. Urban kvel isage. derived from the rural level with adjustment for higher cost ofSecondon school - total, ma and femal-Computed as above. living in urban areas.secondary education requires at least four years of approved pri- Estmaed Popuaion Bdeow Absoute Pet Income Level (per-mary instruction provides Seneral, vocational. or teacher training cent )-rban and rral- Percent of population (urban and ruralinstructions for pupils usually of 12 to 17 years of age; correspond- who are "absolute poor.'ence courses are generally exduded.Vocational Enrollbeni (percent of secondary)-Vocational institu- Comparative Analysis and Data Divisiontions include technimaL industriaL or other programs which operate Economic Analysis and Projections Departmentindependently or as departments of secondary institutions. June 1985

ANNEX IPags 5 of 6

ECONOMIC DEVELOPKlEUr DATA

CNP PElt CAPITA IN iN934-5260 s/

CROSS DOMESTIC PRODUCT IN 1983/84 bh ANNUAL RArE OF GROWrH (2. Constant Prices) SI

55/56-59/60 60/61-64163 65166-69/70 70/71-74/75 75/76-79/80 80181-82/83

US$ Bln. 2

GE" at Market Prices 189.81 100.0 3.7 3.6 3.7 2.9 4.1 5.1Gross Domstic Investment 45.94 24.0Gross National Saving 43.17 22.7Current Accoumt Balance -2.17 -1.5

OUTPUT. LABOR FORCE AND PRODUCTIVIT IN 1981

Value added (at factor cost) Labor Force i/ '.A. Per WorkerUS$ Bin. 2 Nil. 2 U05 2 of National Average

Agriculture 52.5 35.9 172.7 70.6 304 51Industry 34.5 23.6 31.6 12.9 1092 183Services 59.2 40.5 40.3 16.5 1469 246Total/Average 146.2 10O0. 246.6 100.0 598 10W

GOVERkMENT FINANCE

Ceneral Government e/ Centrtl Gov.resentRs. Bln. 2 of GDP Rs. Br. 2 of GDP1983/86 1983/864 1979/80-1983184 1983/84 1983/64 1979/80-1982Z84

Current Receipts 378.54 19.3 19.5 201.67 10.3 10.3Current Expenditunes 397.12 20.3 19.4 225.42 11.5 10.9Current Surplus/Deficit -18.58 -1.0 0.1 -23.75 -1.2 -0.6Capital Expenditures fl 149.66 7.7 8.0 114.12 5.8 5.8External Assistance (net) d/ 19.16 1.0 1.1

MDNEY. CREDIT AND PRICES 1970/71 1975176 1978/79 1979/80 1980/81 1981/82 1982,83 1983/84 January 1984 Januarv 1985(Ma Billion outstanding at end of period)

Money and Quasi Money 109.8 224.8 401.1 472.3 557.7 627.5 728.7 860.9 835.1 993.9Bank Credit to Government (net) 54.6 106.3 159.3 200.1 257.2 306.3 353.8 407.7 403.1 483.9Bank Credit to Commercial Sector 64.6 156.2 255.3 310.1 366.4 434.6 517.1 612.7 575.5 685.0

(Percentage or Index Numbers) April-Jan 83/84 April-Jan 84185

Money nd quasi Money as a Zof GDP 27.3 30.3 41.1 44.1 63.7 42.5 44.5 44.0

Wholesale Price Index(1970/71 - 100) 100.0 173.0 185.8 217.6 257.3 281.4 288.6 315.2 313.6 336.7

Annual Percentage changes in:

Wholesale Price Index 7.7 -1.1 - 17.1 18.2 9.4 2.6 9.2 9.2 7.4Bank Credit to Government (net) 15.0 22.7 16.0 25.6 28.5 19.1 15.1 15.3 16.9 -j 23.2 h/Bank Credit t Commercial Sector 19.4 22.7 20.3 21.5 18.2 18.6 17.7 18.7 13.8 g/ 15.6 h/

*/ The per capita GIP estim-te is at market prices, using World Bank Atlas methodology, base period 1981-B3.All other conversions to dollars in this table are at the average exchange rate prevailing during the period covered.

hi quick Estlimtes. Central Statistical Organization.I Computed from trend line of CNP at factor cost series, including one observation before first vear and one. obserwation after

last year of lihted period.d/ World Bank estimtes of net disbursement of concessional aid and IBRW.e/ Transfers between Centre and States have been netted out.f/ All loans and advances to third parties have been netted out.g/ Percentage change from end-March 1983 to end-Jnan.4.h/ Percentage change from end-March 1984 to end-Jan.85.i/ Total Labor Force and percentage breakdown from 1981 Census. Excludes dara for Assem.

ANNEX TPageTot 6

BALANCE OF PAYNENTS 1981/82 1982/83 1983/84 1984/85 HERCHANDISE EXPORTS (AVERACE 1980181-1983/84) if(USs "In.) USS Mn. 2

Exports of Goods .f 8.519 8,290 8,355 8,724 Engineering Goods 1115 13Imports of Goods .f -15,301 -14.290 -14,040 -14.501 Tea 469 6Trade Balance - 6,782 - 6,000 - 5.685 - 5.777 Gums 1009 12NFS Cstt) 1,002 935 948 1.098 Clothgng 688 8

Leather and Leather Products 343 4Resource Balance - 5,780 - 5.065 - 4.737 - 4,678 lute Manufactures 269 3

Iron Ore 400 5Xnterest Income (net) k/ 350 - 302 - 664 - 785 CotLun Textiles 316 4Net Transfers 1/ 2,317 2,504 2,880 2,930 Sugar 104 1

Others 3704 44Balance on Current Account - 3.113 - 2.863 - 2.521 - 2,533Direct investment 10 65 62 61

Total 8417 100Offical Loans & Grants (net) 1681 1.901 1,961 1,944Gross Disbursements 2,269 2,513 2,578 2,585 SITERNAL OEBT, MARCH 31, 1984Amortization 588 612 617 641

US$ billionPrivate Borrowlng (net) 338 366 528 844

Outstanding and Disbursed 21.5Non-Resident Deposits 260 578 903 600 Undibursed 10.4Tranoaction with IMF (net) 690 1,980 1.295 70 Outstanding including Undisbursed 31.9All other Items of - 2,264 - 1,522 - 1,347 - 683

Increase in Reserves C-) 2,398 - 501 - 882 - 303 DEBT SERVICE RtATI1 FOR 1983/84 j/ n/ 13.6 per centGross Reserves (end year) p/ 46461 4.965 5,847 6,150Net Reserves (end year) mf 3,497 2,089 1,697 2,250

xBRD/rDA LENDImG. MARCH 31, 1985 1/Fuel and Related Materials

rs s millionImports (Petroleum) S' 5.553 4,614 2.983 3.026 IBRD IDA

of which: Crude 3.921 3.139 2.183 1,015Products 1,632 1.475 800 2,010 ('ustanding and Disbursed 2,158 8.902

Undi*bursed 4.326 3,748Outstanding including Undisbursed 6,484 12,650

RATE OF EXCHANGE

June 1966 to odd-December 1971 US$1.00 - Re 7.50Rs 1.00 - US$0.13333

Mid-December 1971 to end-June 1972: USS1.00 - Rs 7.27927Rs 1.00 - US50.137376

After end-June 1972 Floating Race

Spot Rate and-March 1984 U 551.00 - Ps 10.7181Rs 1.00 - USSO.0933

Spot Race end-March 1985 USS1.00 - Rs 12.3457Rs 1.00 - USSO.0810

J Estimatedk/ Figures given cover all investment income (net). Major payments are interest on foreign loans and charges paid to IMF,

and mjor receipts is interest earned on foreign assets.1/ Figures given include workers' remittances but exclude official grant assistance which is included within official loans

and grants, and non-resident deposits which are shown separately.m/ Exclude net use of LMF credit.n/ Amortization and interest payments on foreign loans as a percentage of total current receipts.of Includes exchbage rate adjustments to the valuation of reserves and financing of imbalances in rupee trade.uu xcludin% gold.S' Net of petioleuss exports

Page 1 of 5

TRE STATUS OF ROU=P MPRAISIN INDI

A. STATEMENT OF BANK LOANS AND IDA CEDITS(As of September 30, 1985)

Us$ millionLoan or Fiscal (Net of Cancellatios)Credit Year offo.. Aa,rovel IJADL 11J 2W&burmee I/

55 Loans/ 2,528.9 - -

102 Credits fully disbursed - 5,938.9 -

482-IN 1974 Karnataka Dairy - 29.2 0.051251-IN 1976 Andhra Pradesh Irrigation 145.0 - 9.04680-IN 1977 Kerala Agric. Development - 30.0 7.77690-IN 1977 West Bengal Agricultural

Extension & Research - 12.0 5.281394-IN 1977 Gujarat Fisheries 14.0 - 1.58747-IN 1978 Second Foodgrain Storage - 107.0 22.14761-IN 1978 Bihar Agricultural

Extension & Research - 8.0 3.83788-IN 1978 Karnataka Irrigation - 117.6 20.71793-IN 1978 Korba Thermal Power - 200.0 12.70806-IN 1978 Jaumu-Kashmir Horticulture - 14.0 8.01816-IN 1978 National Seeds II - 16.0 0.681592-IN 1978 Telecomunications VII 120.0 - 7.23824-IN 1978 National Dairy - 150.0 14.25842-IN 1979 Bombay Water Supply II - 196.0 102.39844-IN 1979 Railvay Ncdernization

& Maintenance - 190.0 5.8888-IN 1979 Punjab Water Supply & Sewerage - 38.0 3.24855-IN 1979 National Agricultural Research - 27.0 9.88

1648-IN 1979 Ramagundam Thermal Power 50.0 - 41.09889-IN 1979 Punjab Irrigation - 129.0 15.34911-IN 1979 Rural Electrification Corp. II - 175.0 3.25954-IN 1980 ?aharashtra Irrigation II - 210.0 11.83961-IN 1980 Gujarat Conmunity Forestry - 37.0 0.16963-IN 1980 Ialand Fisheries - 20.0 12.79981-IN 1980 Population II - 46.0 19.591003-IN 1980 Tamil Nadu Nutrition - 32.0 14.861011-IN 1980 Gujarat Irrigation II - 175.0 71.991012-IN 1980 Cashewnut - 22.0 13.601027-IN 1980 Singrauli Thermal II - 300.0 112.451028-IN 1980 Kerala Agricultural Extension - 10.0 5.761033-IN 1980 Calcutta Urban Transport - 56.0 14.74

ANNEX IIPage 2 of 5

US$ millionLoan or Fiscal (Net of Cancellations)Credit Year ofNo. Approval Purpose Bank IDA jj Undisbursed 3

1034-IN 1980 Karnataka Sericulture 54.0 21.401046-IN 1980 Rajasthan Water Supply & Sewerage - 80.0 38.841843-IN 1980 Industry DFC XIII 99.0 - 3.421053-IN 1980 Farakka Thermal Power - 225.0 68.791887-IN 1980 Farakka Thermal Power 25.0 - 25.001897-IN 1981 Kandi Watershed and

Area Development 30.0 - 17.091072-IN 1981 Bihar Rural Roads - 35.0 7.901078-IN 1981 Mahanadi Barrages - 83.0 35.751082-IN 1981 Madras Urban Development II - 42.0 18.641108-IN 1981 M.P. Medium Irrigation - 140.0 70.151112-IN 1981 Telecommunications VIII - 31A.0 68.361116-IN 1981 Karnataka Tank Irrigation - 54.0 31.841125-IN 1981 Hazira Fertilizer Project - 399.1 60.931135-IN 1981 Mabarasbtra Agricultural Ext. - 23.0 7.571137-IN 1981 Tamil Nadu Agricultural Ext. - 28.0 13.371138-IN 1981 M.P. Agricultural Ext. II - 37.0 24.261146-IN 1981 National Cooperative

Development Corp. II - 125.0 61.241172-IN 1982 Korba Thermal Power Project II - 400.0 242.571177-IN 1982 Madhya Pradesh Major Irrigation - 220.0 139.152050-IN 1982 Tamil Nadu Newsprint 100.0 - 2.401178-IN 1982 West Bengal Social Forestry - 29.0 18.861185-IN 1982 Kanpur Urban Development - 25.0 12.752051-IN 1982 ICICI XIV 150.0 - 21-602076-IN 1982 Ramagundam Thermal Power II 300.0 - 256.891219-IN 1982 Andhra Pradesh Agricultural Ext. - 6.0 4.052123-IN 1982 Refineries Rationalization 200.0 - 71.572165-IN 1982 Rural Electrification III 304.5 - 215.941269-IN 1982 Kallada Irrigation - 60.0 25.102186-IN 1982 Kallada Irrigation 20.3 - 20.001280-IN 1983 Gujarat Water Supply - 72.0 59.071286-IN 1983 Jammu/Kasbmir and

Haryana Social Forestry - 33.0 22.301288-IN 1983 Chambal Madhya Pradesh

Irrigation II - 31.0 16.301289-IN 1983 Subernarekha Irrigation - 127.0 101.902205-IN 1983 Krishna-Godavari Exploration 165.5 - 114.481299-fI 1983 Railways Modernization &

Maintenance II - 200.0 168.632210-IN 1983 Railways Modernization &

Maintenance II 200.0 - 197.042241-IN 1983 South Bassein Gas Development 139.3 - 133.711319-IN 1983 Haryana Irrigation II - 150.0 96.851332-IN 1983 U.P. Public Tubevells II - 101.0 84.51

ANNEX IIPage 3 of 5

US$ millionLoan or Fiscal (Net of Cancellations)Credit Year ofNo. AnRroval Purpose Bank IDA 1/ Undisbursed 2/

1356_IN 1983 Upper Indravati Hydro Power - 170.0 149.502278-IN 1983 Upper Indravati Hydro Power 156.4 - 156.011369-IN 1983 Calcutta Urban Development III - 147.0 134.502283-IN 1983 Central Power Transmission 250.7 - 250.072295-IN 1983 Himalayan Watershed Nanagement 46.2 - 45.311383-IN 1983 Maharashtra Water Utilization - 32.0 23.272308-IN 1983 Maharashtra Water Utilization 22.7 - 22.642329-IN 1983 Madhya Pradesh Urban 24.1 - 23.471397-IN 1984 Orissa Irrigation II - 105.0 74.521424-IN 1984 Rainfed Areas Watershed Dev. - 31.0 31.151426-IN 1984 Population III - 70.0 67.481432-IN 1984 Karnataka Social Forestry - 27.0 22.552387-IN 1984 Xhava Sheva Port 250.0 - 245.882393-IN 1984 Dudhichua Coal 151.0 - 150.622403-IN 1984 Cambay Basin Petroleum 242.5 - 239.532415-IN 1984 Madhya Prad-sh Fertilizer 203.6 - 195.421454-IN 1984 Tamil Nadu Water Supply - 36.5 36.03SF-12-IN 1984 Tamil Nadu Water Supply - 36.5 37.401468-IN 1984 Periyar Vaigai II Irrigation - 17.5 12.00SF-16-IN 1984 Periyar Vaigai II Irrigation - 17.5 17.591483-IN 1984 Upper Ganga Irrigation - 125.0 124.481496-IN 1984 Gujarat Medium Irrigation - 172.0 146.702416-IN 1984 Indira Sarovar Hydroelectric 157.4 - 157.01SF-20-IN 1984 Indira Sarovar Hydroelectric - 129.8 129.252417-IN 1984 Railways Electrification 280.7 - 280.002442-IN 1984 Farakka II Thermal Power 300.8 300.052452-IN 1984 Fourth Trombay Thermal Power 135.4 - 135.061502-IN 1984 National Cooperative

Development Corporation III - 220.0 214.211514-IN 1985 Kerala Social Forestry - 31.8 31.651523-IN 1985 National Agric. Extension I - 39.1 40.891544-IN 1985 Bombay Urban Development - 138.0 145.882497-IN 1985 Narmada (Gujarat) Dam and Power* 200.0 - 200.001552-IN 1985 Narmada (Gujarat) Dam and Power* - 100.0 100.001553-IN 1985 Narmada (Gujarat) Canal* - 150.0 150.001569-IN 1985 Second National Agricultural Ext.* - 49.0 49.001611-IN 1985 National Social Forestry* - 165.0 165.001613-IN 1985 Indira Sarovar Hydroelectric* - 13.2 13.202498-IN 1985 Jharia Coking Coal 248.0 - 248.002505-IN 1985 Maharashtra Petrochemical 300.0 - 300.002534-IN 1985 Second National Highway* 200.0 - 200.002544-IN 1985 Chandrapur Thermal Power* 300.0 - 300.002555-IN 1985 Rihand Power Transmission* 250.0 - 250.002582-IN 1985 Kerala Power* 176.0 - 176.001619-IN 1986 West Bengal Minor Irrigation* - 99.0 99.00

JUI IIPage 4 of 5

US$ millionLoan or Fiscal (let of Cancellations)Credit Year ofNo,. Appzojr l isrnoke lc IDA 1/ Undisbursee e

1621-IN 1986 Maharashtra Composite Irrigatiov* - 160.0 160.001622-IN 1986 Kerala Water Supply and Sanitation* - 41.0 41.001623-IN 1986 West Bengal Population* - 51.0 51.00

Total 8,487.0 13,752.7of vhich has been repaid 1,324.5 219.7

Total nov outstandi 7,162.5 13,533.0Aount Sold 133.8

of which has been repaid 133.8Total now held by Bank and IDA 2/ 7,162.5 13,533.0

Total undisbursed (excluding *) 3,887.15 3,473.30

jJ IDA Credit asounts for SDR-denominated Credits are expressed in terms of theirUS dollar equivalents, an established at the time of Credit negotiations and assubsequently presented to the Board.

.; Undisbursed amounts for SDR-denominsted IDA Credits are derived from cumulativedisbursements converted to their US dollar equivalents at the SDRIUS dollarexchange rate in effect on September 30, 1985.

ij Prior to exchange adjustment.

N Not yet effective.

Page 5 of 5

B. STATEMUT OF IFC INVESTMI_TS(As of September 30, 1985)

Amount (11$ million)FiscalYear Company Loan Equity Total

1959 Republic Forge Compauy Ltd. 1.5 - 1.51959 Kirloskar Oil Engines Ltd. 0.8 - 0.81960 Assam Sillimanite Ltd. 1.4 - 1.41961 R.S.B. Pumps Ltd. 0.2 - 0.21963-66 Precision Bearings India Ltd. 0.6 0.4 1.01964 Fort Gloster Industries Ltd. 0.8 0.4 1.21964-75-79 Mahindra Ugine Steel Co. Ltd. 11.8 1.3 13.11964 Laksbmi Machine Works Ltd. 1.0 0.3 1.31967 Jayshree Chemicals Ltd. 1.1 0.1 1.21967 Indian Explosives Ltd. 8.6 2.9 11.51969-70 Zuari Agro-Chemicals Ltd. 15.1 3.8 18.91976 Escorts Limited 6.6 - 6.61978 Housing Development Finance

Corporation 4.0 1.2 5.21980 Deepak Fertilizer and

Petrochemicals Corporation Ltd. 7.5 1.2 8.71981 Coromandel Fertilizers Limited 15.9 - 15.91981 Tata Iron-and Steel Company Ltd. 38.0 - 38.01981 Mahindra, Mahindra Limited 15.0 - 15.01981 Nagarjuna Coated Tubes Ltd. 2.9 0.3 3.21981 Nagarjuna Signode Limited 2.3 - 2.31981 Nagarjiuns Steels Limited 1.5 0.2 1.71982 Asbok-Leyland Limited 28.0 - 28.01982 The Bombay Dyeing and

Manufacturing Co. Ltd. 18.8 - 18.81982 Bharat Forge Company Ltd. 15.7 - 15.71982 The Indian Rayon Corp. Ltd. 8.i - 8.11984-86 The Gwalior Rayon Silk Manu-

facturing (Weaving) Co. Ltd. 13.5 - 13.51985 Bihar Sponge 10.4 0.8 11.21985 Bajaj Auto Ltd. 22.1 - 22.11985 Modi Cement 12.5 - 12.51985 India Lease Development Ltd. 5.0 0.4 5.41986 Larsen and Toubro Ltd. 17.2 ILA.2

TOTAL GROSS COlHITNEITS 287.9 13.3 301.2

Less: Cancellations, Terminations,Repayments and Sales 62.0 6,3 168.3

Now Held 125.9 7.0 132.9

Undisbursed 77.0 1.2 78.2.. mr mm. um m._

ANNEX IIIPage 1 of 2

INDIA

CEMENT INDUSTRY PROJECT

SUPPLEMENTARY PROJECT DATA SHEET

Section I: Timetable of Kev Events

(a) Time taken by the country to PreDawre the Droiect

About one and a half years.

(b) The atency which has prepared the uroiect

ICICI.

Cc) Date of first Dresentation to the Bank anddate of first mission to consider the Droiect

July 1983.

(d) Date of departure of aypraisal mission

Nay 1985.

Ce) Date of completion of neaotiations

December 1985.

(f) Planned date of effectiveness

April 1985.

Section II: Special Ivlementation Actions

None.

ANNEX IIIPage 2 of 2

section TII: Suecial Conditions

(a) The beneficiary companies would install environmentalcontrol equipment and facilities (para. 57);

(b) ICICI would submit to the Bank for review all small-scale modernization and rehabilitation subprojectswhose funding requirements out of the proceeds of theloan would exceed US$6 million, prior to ICICIapproval of such subprojects (para. 58);

(c) CKA would carryout the proposed manpower study andfeasibility study for a joint training center byDecember 31, 1986 (para. 60); and

(d) ICICI and IDBI would execute for conversionsubprojects, sub loan agreements, which wouldinclude: (i) arrangements for adequate cost overrunfinancing; and (ii) maintenance of financial positionand capital structure ratios satisfactory to the Bank(pars. 64).

(e) Signing subsidiary Loan Agreements between GOI andICICI and IDBI for the use of funds earmarked forconversion subprojects, and signing of a GrantAgreement between GOI and ICICI for the use of thefunds earmarked for technical assistance would beconditions of effectiveness of the Bank Loan to GOI(Pars 65).

(f) Signing of a subloan agreement vith each of thecompanies for the conversion subprojects would be acondition of disbursements (Para 68).

ANNEX IV

PROCURENET ARRANGEMENTS(US$ million)

Procurement Method TotalProject Element ICB LCB Other Cost

Equipment & Spares 141.4 133.6 3.0 278.0(141.4) (33.8) (3.0) (183.2)

Civil Works 14.1 31.5 - 45.6(14.1) al / - (14.1)

Infrastructure - 4.6 - 4.6Erection/Start-up - 24.1 - 24.1Project Management 8.7 8.7Training Programs 0.8 0.8

(0.6) (0.6)Technical Assistance 6.2 6.2

(4.8) (4.8)Equipment & Softvare for 2.3 2.3Training Facilities _2_3__ (2.3)

Total 155.5 193.8 21.0 770.3(155.5) (33.8) (10.7) (200.0)

A/ Purchase of steel.b/ Not including interest during construction and taxes and duties.c/ Only direct foreign exchange expenditures are financed by Bank Loan.

Note: Figures in parentheses indicate accounts financed rrom proposedBank Loan.

IBRD 19204R

. f > HIMACHAL . INDIAPRA PR DESH CEMENT INDUSTRY PROJECT

1PNA &-F:;e9< ttri,;i;^xSRegional Distribution of Projected Cement

r PA K I S T A N /v_ - Production and Demand in 1989/90

RAJASTNHAN

BUIA p F A $ BHANTADESHN

~~~~~~~~~~~~~~~~~~~~~~~~~~~ A DESH | ;MADHYA PRADESH

.. rAW E . |

r; 955-l 8 c,1| Boy of Bengol

, .4 jej SvdcJhad {=ztvSUMMARY

A 5 ]~ * * -A PROJECTED PROJECTED SURPLUS- ) I ANDHRA ; REGION DENAND PRODUCTION (DEFICIT)

NORTH 12.33 8.24 (4.09)PRADESH ~~EAST 7.69 4.19 (3.50)pR ,wzJ PRADESH VIEST 17.94 19.26 1.32LjGj Em t ) SOUTH 13.36 18.1S 4.79

9~KARNATAKA\,~ . TOTAt INDIA 51.32 49.84 1.48)KARNATAKA.,

i.S 0 WT-,;~P1H A t 1 CEMENT ROUCTION (ItN MILLIONS Of TomSII llfwqJ - CEMENT DflAN MIN lLLIONS OFNSIArabian Sea | I CEMENT SUtPLUS STATES

Arcblcn Sea s <> -- , , CEMENT DEFICIT STATES

A PROJECT CEMENT PLANT LOCATIONS'"Iftwo,TAM\IL NADU A.C.C. COMPANY NAMES OF THE CEMENT PLANTS

I 1 57 1 0~~~~~~~ STATE CAPITALS

VCDRAlA. . * NAIONAL CAPITALa 100 200 300 400 500 . 0 i-ONSAtOD CAPITKILOMETERS -AREGION BONDARIES

MULES MENDI CIETSO 10 0 200 300 - 0 1douta. Pmd.tmw, D.n.od- Trb_dNtF2o *dlou Thcn 50.000 Ton.s AnnuIly

SRI LANKA

Th - F_ r bWdbP Trw SSdr ' ' NOrE: DOL 10 SCAIE CONSORDAF5 7 ON SOME AREA Sawnuse..a.dowcose-volvinu.do -arr""tweNwuntV.&OWMI&W ~~COrAD0 NOr OE INCLUDSQ IN rW! MAP: SEE MEA

FM. Co.pS dD.0 .'.w. .dandsw FOR ANY 11WORA IONAr hA AEAr AApPr roa.m, l d:h fone,*mmM wEm,SWwid_.t__er_.cA - AJCFI AREAS.

DECEMBER 1985

IBRD 19205RHIMACHAL 24 INDIA

<- tMAl. A5jL CEMENT INDUSTRY PROJECTS I.+~PWNJAB ..~ Regionol Distribution of Cement Production

,be

PA K I S T A N l ~. ,;C -&and Consumption in 1984 /85

~ / t_ { { o {\ 6 -v--; 0BHUTAN

RAJASTHAN , S.---- - 9- t / },:, . - g ;UTTA. :PRADEStI: 2-..w

r. -. MEGHALAYA:_ _ t [ t snrll^~ _ ;-\; - BIHAi :--V

WE ASTANGLADESH

lX42 ~~~~MADHYA PRADESH ,0.5- ffi~~~~~~~~~~ S .T.

|l. 8oy of 8encac

- f SUMMARYACC ANDHRA C REGION CONSUMPTION PRODUCTION (DEFICIT

NORTH 7.51 5.64 11.87), , P PRADESHI EEAST 5.17 2.82 12.35)

2.49 PRADESH ~~~~~ ~~WEST 9.42 10.57 1.15SOUTH 8.38 11.15 2.76

KARNATAK4t TOTAL INDIA 30.47 30.17 (0.30]KARNATAKAi,_

S 0 z1l H fbJ7 1 CEMENT PRODUCTION 1IN1I MLULSO OF TONSI

L2. 1 CEMENT CONSUMPTION IIN MILItONS OF TONS)A ar~ * ec - > I ICEMENT SURPUS STATES

CEMENT DEFICIT STATES

A PRIJECT CEMENT FIANT LOCATIONS

- -,XATAMIL NADU A.C.C. COMPANY NAMES OF THlE CEMENT PLANTS

-to * A STATE CAPITALS

aIO R ° 100 200 300 400 500 REION DARESMILFS 7AL AINA AIA

MuESo 100 200 300 : CEIE-ITS bT

T~~~~~~~~~~~~~ L~~~~~~~~~fI... Tka. 50.00 To.. A-mlloySRI LANKA

.a.oow.w.ibv _ha n~9a~ -rwe Wldir = d '. . NOT: (FIDU rO SCALE CO1SDPERArON SOME AREASMw..oCW*m ;~~~.d. .m.w.md..~~~~a. ao.p~~w ,~~., ~ CULD Nor SE INCLUDD INv ZHE MAP,: SEE FEATIo.C f iO lb. _ _" -_.I...Id Fbo... W FOR AANr lAMRAFATION rHAr MAY APR r ID

-Ij.gaEM~bb mR, .INWImdlt-f _ F -waba u. SUCHl AREAS.

DECEMBER 1985