Project Agreement. Public Disclosure Authorized CREDIT NUMBER /. 67IN LOAN NUMBER 4 IN. Public Disclosure Authorized

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1 Public Disclosure Authorized Public Disclosure Authorized Project Agreement CREDIT NUMBER /. 67IN LOAN NUMBER 4 IN (Kallada Irrigation and Treecrop Development Project) Public Disclosure Authorized among INTERNATIONAL DEVELOPMENT and ASSOCIATION INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT Public Disclosure Authorized and STATE OF KERALA Dated (, 1982

2 CREDIT NUMBER /- 9 IN LOAN NUMBER 4 7 IN PROJECT AGREEMENT AGREEMENT, dated, 1982, among INTERNATIONAL DEVELOPMENT SOCTION (hereinafter called the Association), INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOP- MENT (hereinafter called the Bank) and STATE OF KERALA, acting by its Governor (hereinafter called Kerala). WHEREAS (A) by the Development Credit Agreement of even date herewith between INDIA, acting by its President (hereinafter called the Borrower) and the Association, the Association has agreed to make available to the Borrower an amount in various currencies equivalent to fifty-two million three hundred thousand Special Drawing Rights (SDR 52,300,000), on the terms and conditions set forth in the Development Credit Agreement, but only on condition that Kerala agree to undertake such obligations toward the Association as are hereinafter set forth; (B) by the Loan Agreement of even date herewith between the Borrower and the Bank, the Bank has agreed to make available to the Borrower an amount in various currencies equivalent to twenty million three hundred thousand dollars ($20,300,000), on the terms and conditions set forth in the Loan Agreement, but only on condition that Kerala agrees to undertake such obligations toward the Bank as are hereinafter set forth; and WHEREAS Kerala, in consideration of the Association's entering into the Development Credit Agreement and the Bank's entering into the Loan Agreement, with the Borrower, has agreed to undertake the obligations hereinafter set forth; NOW THEREFORE the parties hereto hereby agree as follows: ARTICLE I Definitions Section Wherever used in this Agreement, unless the context shall otherwise require, the several terms defined in the Development Credit Agreement and in the General Conditions applicable thereto and in the Loan Agreement and the General Conditions applicable thereto have the respective meanings therein set forth.

3 -2- ARTICLE II Execution of the Project Section Kerala shall: (i) carry out the Project described in Schedule 2 to the Development Credit Agreement with due diligence and efficiency and in conformity with appropriate administrative, financial, engineering and agricultural practices; and (ii) provide, or cause to be provided, promptly as needed, the funds, facilities, services or other resources required for the purpose. Section Except as the Association and the Bank shall otherwise agree, procurement of the goods and civil works required for the Project and to be financed out of the proceeds of the Credit and the Loan shall be governed by the provisions of the Schedule to this Agreement. Section (a) Kerala undertakes to insure, or make adequate provision for the insurance of, the imported goods to be financed out of the proceeds of the Credit and the Loan made available to it by the Borrower against hazards incident to the acquisition, transportation and delivery thereof to the place of use or installation, and for such insurance any indemnity shall be payable in a currency freely usable by Kerala to replace or repair such goods. (b) Kerala shall cause all goods and services financed out of the proceeds of the Credit and the Loan made available to it by the Borrower to be used exclusively for the purposes of the Project. Section (a) Kerala shall furnish to the Association and the Bank, promptly upon their preparation, the plans, specifications, reports, contract documents and construction and procurement schedules for the Project, and any material modifications thereof or additions thereto, in such detail as the Association or the Bank shall reasonably request. (b) Kerala shall: (i) maintain, or cause to be maintained, records and procedures adequate to record and monitor the progress of the Project (including its cost and the benefits to be derived from it), to identify the goods and services financed out of the proceeds of the Credit and the Loan, and to disclose their use in the Project; (ii) enable the Association's and the Bank's

4 -3- representatives to visit the facilities and construction sites included in the Project and to examine the goods financed out of the proceeds of the Credit and of the Loan and any relevant records and documents; and (iii) furnish to the Association and the Bank at regular intervals all such information as the Association or the Bank shall reasonably request concerning the Project, its cost and, where appropriate, the benefits to be derived from it, the expenditures of such proceeds and the goods and services financed out of such proceeds. (c) Upon the award by Kerala of any contract for goods, works or services to be financed out of the proceeds of the Credit and of the Loan, the Association or the Bank may publish a description thereof, the name and nationality of the party to whom the contract was awarded and the contract price. (d) Promptly after completion of the Project, but in any event not later than six months after the Closing Date or such later date as may be agreed for this purpose among the Association, the Bank and Kerala, Kerala shall prepare and furnish to the Association and the Bank a report, of such scope and in such detail as the Association and the Bank shall reasonably request, on the execution and initial operation of the Project, its cost and the benefits derived and to be derived from it, the performance by Kerala, the Association and the Bank of their respective obligations under the Project Agreement and the accomplishment of the purposes of the Credit and of the Loan. Section (a) Kerala shall, at the request of the Association or the Bank, exchange views with the Association and the Bank with regard to the progress of the Project, the performance of its obligations under this Agreement and other matters relating to the purposes of the Credit and of the Loan. (b) Kerala shall promptly inform the Association and the Bank of any condition which interferes or threatens to interfere with the progress of the Project, the accomplishment of the purposes of the Credit and of the Loan, or the performance by Kerala of its obligations under this Agreement.

5 ARTICLE III Particular Covenants Section Kerala shall maintain an adequately staffed Kallada Wing in SADU to promote and organize on-farm investment in the Project Area. Section Kerala shall: (i) establish by September 30, 1982, and thereafter maintain, an adequately staffed Planning, Monitoring and Coordinating Cell in its Irrigation Department for the monitoring and coordination of the project implementation; and (ii) cause such Cell to: (A) undertake a feasibility study for a second phase of irrigation and treecrop development for the additional area adjacent to the Project Area; and (B) furnish the study by December 31, 1984, to the Association and the Bank for their review. Section Kerala shall maintain in its Irrigation Department an adequately staffed: (i) Kallada Operations and Maintenance Division for the management of the irrigation system under the Project; and (ii) Kallada Minor Conveyance Division for the implementation of the minor water conveyance systems under Part B of the Project. -4- Section Kerala shall: (i) by September 30, 1982, furnish to the Association and the Bank the terms of reference for a management study to establish rules, procedures and requirements for securing effective operation and preventive maintenance of the irrigation systems under the Project; (ii) by June 30, 1983, carry out said study; and (iii) as soon as feasible thereafter, implement the operation and maintenance estimates and procedures based on the recommendations of the study. Section With the objectives of ensuring an optimal level of recovery of annual operation and maintenance costs and cost of infrastructure investment, having regard inter alia, to incentives for, and payment capacity of, farmers, Kerala undertakes: (i) by September 30, 1982 to furnish to the Association and the Bank a plan for review of the water and water-related charges in Kerala; (ii) by December 31, 1983 carry out such a review; and (iii) as soon as feasible thereafter, to implement an appropriate system of water and water-related charges in the Project Area based on recommendations arising from said review

6 -5- after paying due regard to the Association's and the Bank's comments, if any, on such recommendations. Section (a) Kerala shall: (i) constitute a panel of experts with qualifications, experience, and terms of reference acceptable to the Association, the Bank and Kerala, to review the plans and design of the Kallada dam and its associated structures and its adequacy; and (ii) cause said panel to conduct periodic reviews during design and construction to examine whether any new grounds for making changes in the design of the dam have become apparent. (b) Without limiting the generality of Section 2.01 above, Kerala shall, under arrangements satisfactory to the Association, the Bank and Kerala, cause the Kallada dam and the related structures constructed under the Project to be periodically inspected in accordance with sound engineering practice in order to determine whether there are any deficiencies in the condition of such structures, or in the quality and adequacy of maintenance or methods of operations of the same, which may endanger their safety. To this end, Kerala shall propose to the Association and the Bank appropriate arrangements for the Association's and the Bank's review no later than one year before the expected completion of such structures. Section Kerala undertakes to take all measures as may be considered necessary to minimize the risk of malaria and other water-related diseases within the Project Area. Section Kerala shall ensure that the construction of the minor water conveyance systems described in Part B of the Project shall be carried out simultaneously with, or, as soon as feasible after, the construction of the works described under Part A of the Project. ARTICLE IV Financial Covenants Section Kerala shall cause its departments and other agencies and authorities responsible for carrying out the Project or any part thereof to: (i) maintain separate records and accounts adequate to reflect, in accordance with sound accounting principles and procedures consistently applied, its resources,

7 -6- expenditures and operations related to the Project; and (ii) furnish to the Association and the Bank copies of their accounts and financial statements related to the Project for each fiscal year, certified as to their accuracy and authenticity by an independent auditor acceptable to the Association and the Bank, as soon as available but in any case not later than nine months after the end of such year. Section Kerala shall cause its departments and other agencies and authorities responsible for carrying out the Project or any part thereof to: (i) have their accounts and financial statements related to the Project for each fiscal year audited, in accordance with appropriate auditing principles consistently applied, by independent auditors acceptable to the Association and the Bank; (ii) furnish to the Association and the Bank immediately following its finalization, the report of such audit by said auditors, of such scope and in such detail as the Association or the Bank shall have reasonably requested; and (iii) furnish, or cause to be furnished, to the Association and the Bank such other information concerning said accounts and records, financial statements and the audit thereof as the Association or the Bank shall from time to time reasonably request. ARTICLE V Effective Date; Termination; Cancellation and Suspension Section This Agreement shall come into force and effect on the date upon which the Development Credit Agreement and the Loan Agreement become effective. Section (a) This Agreement and all obligations of the Association and the Bank and of Kerala thereunder shall terminate on the earlier of the following two dates: (i) the date on which the Development Credit Agreement or the Loan Agreement shall terminate in accordance with its terms, provided that the other of said Agreements shall have terminated theretofore or shall terminate on the same date; or (ii) a date 20 years after the date of this Agreement.

8 -7- (b) If both the Development Credit Agreement and the Loan Agreement terminate in accordance with their terms before the date specified in paragraph (a) (ii) of this Section, the Association and the Bank shall promptly notify Kerala of this event. Section All the provisions of this Agreement shall continue in full force and effect notwithstanding any cancellation or suspension under the General Conditions. ARTICLE VI Miscellaneous Provisions Section Any notice or request required or permitted to be given or made under this Agreement and any agreement between the parties contemplated by this Agreement shal be in writing. Such notice or request shall be deemed to have been duly given or made when it shall be delivered by hand or by mail, telegram, cable, telex or radiogram to the party to which it is required or permitted to be given or made at such party's address hereinafter specified or at such other address as such party shall have designated by notice to the party giving such notice or making such request. The addresses so specified are: For the Association: International Development Association 1818 H Street, N.W. Washington, D.C United States of America Cable address: For the Bank: INDEVAS Washington, D. C. International Bank for Reconstruction and Development 1818 H Street, N.W. Washington, D.C United States of America

9 -8- Cable address: INTBAFRAD Washington, D.C. For Kerala: Chief Secretary to the Government of Kerala Trivandrum India Cable address: CHIEFSEC Trivandrum India Section Any action required or permitted to be taken, and any document required or permitted to be executed, under this Agreement on behalf of Kerala may be taken or executed by a Secretary to the Government of Kerala or such other person or persons as Kerala shall designate in writing, and Kerala shall furnish to the Association and the Bank sufficient evidence of the authority and the authenticated specimen signature of each such person. Section As long as any part of the Credit shall remain unwithdrawn or outstanding and unless Kerala has been notified otherwise by the Bank, all action taken, including approvals given by the Association pursuant to the provisions of this Agreement, shall be deemed to be taken or given in the name and on behalf of both the Association and the Bank; and all information furnished by the Borrower to the Association pursuant to the provisions of this Agreement shall be deemed to be furnished to both the Association and the Bank. Section This Agreement may be executed in several counterparts, each of which shall be an original, and all collectively but one instrument.

10 IN WITNESS WHEREOF, the parties hereto, acting through their representatives thereunto duly authorized, have caused this Agreement to be signed in thei respective names in the District of Columbia, United States of America, as of the day and year first above written. INTERNATIONAL DEVELOPMENT ASSOCIATION By r,-t u ')j Regional Vice President South Asia INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT By /~ F/rt}4J Regional Vice President South Asia STATE OF KERALA By ' Autho zed Representative

11 SCHEDULE Procurement A. International Competitive Bidding 1. Except as provided in Part D hereof, goods and civil works shall be procured under contracts awarded in accordance with procedures consistent with those set forth in the current edition of the "Guidelines for Procurement under World Bank Loans and IDA Credits" published by the Bank in March 1977 (hereinafter called the Guidelines), on the basis of international competitive bidding as described in Part A of the Guidelines. 2. For goods and works to be procured on the basis of international competitive bidding, in addition to the requirements of paragraph 1.2 of the Guidelines, Kerala shall prepare and forward to the Association and the Bank as soon as possible, and in any event not later than 60 days prior to the date of availability to the public of the first tender or prequalification documents relating thereto, as the case may be, a general procurement notice, in such form and detail and containing such information as the Association or the Bank shall reasonably request; the Association and the Bank will arrange for the publication of such notice in order to provide timely notification to prospective bidders of the opportunity to bid for the goods and works in question. Kerala shall provide the necessary information to update such notice annually so long as any goods or works remain to be procured on the basis of international competitive bidding. 3. For the purpose of evaluation and comparison of bids for the supply of goods to be procured on the basis of international competitive bidding: (i) bidders shall be required to state in their bid the c.i.f. (port of entry) price for the imported goods, or the ex-factory price or off-the-shelf price of other goods, offered in such bid; (ii) customs duties and other import taxes levied in connection with the importation, or the sales and similar taxes levied in connection with the sale or delivery,pursuant to the bid, of the goods shall not be taken into account in the evaluation of the bids; and (iii) the cost of inland freight and other expenditures incidental to the delivery of the goods to the place of their use or installation shall be included.

12 B. Preference for Domestic Manufacturers In the procurement of goods in accordance with the procedures described in Part A of this Schedule, goods manufactured in India may be granted a margin of preference in accordance with, and 3ubject to, the following provisions: 1. All bidding documents for the procurement of goods shall clearly indicate any preference which will be granted, the information required Lo establish the eligibility of a bid for such preference and the following methods and stages that will be followed in the evaluation and comparison of bids. 2. After evaluation, responsive bids will be classified in one of the following three groups: (1) Group A: bids offering goods manufactured in India if the bidder shall have established to the satisfaction of Kerala and the Association and the Bank that the manufacturing cost of such goods includes a value added in India equal to at least 20% of the ex-factory bid price of such goods. (2) Group B: all other domestic bids. (3) Group C: bids offering any other goods. 3. In order to determine the lowest evaluated bid of each group, all evaluated bids in each group shall first be compared among themselves, without taking into account customs duties and other import taxes levied in connection with the importation, and sales and similar taxes levied in connection with the sale or delivery, pursuant to the bids, of the goods. Such lowest evaluated bids shall then be compared with each other, and if, as a result of this comparison, a bid from group A or group B is the lowest, it shall be selected for the award. 4. If, as a result of the comparison under paragraph 3 above, the lowest bid is a bid from group C, all group C bids shall be further compared with the lowest evaluated bid from group A after adding to the evaluated bid price of the imported goods offered in each group C bid, for the purpose of this further comparison only, an amount equal to: (i) the amount of customs duties and other import taxes which a non-exempt importer would have to pay for the importation of the goods offered in

13 -12- such group C bid; or (ii) 15% of the c.i.f. bid price of such goods if said customs duties and taxes exceed 15% of such price. If the group A bid in such further comparison is the lowest, it shall be selected for the award; if not, the bid from group C which as a result of the comparison under paragraph 3 is the lowest evaluated bid shall be selected. C. Preference for Domestic Contractors With respect to the evaluation of bids for any contract for civil works included under Category (1) of the table set forth in Schedule 1 to the Development Credit Agreement and to be procured in accordance with the procedures described in Part A of this Schedule, Kerala may grant a margin of preference of 7-1/2% to domestic contractors, in accordance with, and subject to, the following provisions: 1. Contractors applying foe such preference shall be asked to provide, as part o' the data for qualification, such information, including details of ownership, as shall be required to determine whether, according to the classification established by Kerala and accepted by the Association and the Bank, a particular firm or group of firms qualifies for a domestic preference. The bidding documents shall clearly indicate the preference and the method that will be followed in the evaluation and comparison of bids to give effect to such preference. 2. After bids have been received and reviewed by Kerala, responsive bids will be classified into the following groups: (i) bids offered by domestic contractors eligible for preference; and (ii) bids offered by other contractors. For the purpose of evaluation and comparison of bids an amount equal to 7-1/2% of the bid amount shall be added to bids received under group (ii) above. D. Other Procurement Procedures 1. Civil works estimated to cost the equivalent of $5,000,000 or less per coatract may be procured on the basis of competitive bidding advertia-d locally, in accordance with procedures satisfactory to the Association and the Bank, it being

14 understood that: (i) where such competitive bidding is not possible civil works may be carried out through piecework contracts or rate contracts; and (ii) force account may be used only when required by safety and quality considerations or when quantities cannot be estimated in advance with sufficient precision, provided, however, that civil works carried out through piecework contracts or rate contracts shall not exceed 10% of the total cost of civil works and that the aggregate cost of civil works carried out through force account shall not exceed 10% of the total cost of civil works. 2. Contracts for light equipment, vehicles, furniture and survey instruments may be awarded on the basis of competitive bidding advertised locally in accordance with procedures satisfactory to the Association and the Bank. E. Review of Procurement Decisions by the Association 1. Review of invitations to bid and of proposed awards and final contracts: With respect to all civil works contracts estimated to cost the equivalent of $500,000 or more, and all contracts for equipment and vehicles estimated to cost the equivalent of $100,000 or more: (a) Before bids are invited, Kerala shall furnish to the Association and the Bank, for their comments, the text of the invitations to bid and the specifications and other bidding documents, together with a description of the advertising procedures to be followed for the bidding, and shall make such modifications in the said documents or procedures as the Association and the Bank shall reasonably request. Any further modification to the bidding documents shall require the Association's and the Bank's concurrence before it is issued to the prospective bidders. (b) After bids have been received and evaluated, Kerala shall, before a final decision on the award is made, inform the Association and the Bank of the name of the bidder to which it intends to award the contract and shall furnish to the Association and the Bank, in sufficient time for its review, a detailed report on the evaluation and comparison of the bids received, and such other information as the Association or the Bank shall reasonably request. The Association or the Bank shall, if it determines that the intended award would be inconsistent with the

15 -14- Guidelines or this Schedule, promptly inform Kerala and state the reasons for such determination. (c) The terms and conditions of the contract shall not, without the Association's and the Bank's concurrence, materially differ from those on which bids were asked or prequalification was invited. (d) Two conformed copies of the contract shall be furnished to the Association and the Bank promptly after its execution and prior to the submission to the Association or the Bank of the first application for withdrawal of funds from the Credit Account or the Loan Account in respect of such contract. 2. With respect to each contract not governed by the preceding paragraph, Kerala shall furnish to the Association and the Bank, promptly after its execution and prior to the submission to the Association or the Bank of the first application for withdrawal of funds from the Credit Account or the Loan Account in respect of such contract, two conformed copies of such contract, together with the analysis of the respective bids, recommendations for award and such other information as the Association or the Bank shall reasonably request. The Association or the Bank shall, if it determines that the award of the contract was not consistent with the Guidelines or this Schedule, promptly inform Kerala and state the reasons for such determination. 3. Before agreeing to any material modification or waiver of the terms and conditions of a contract, or granting an extension of the stipulated time for performance of such contract, or issuing any change order under such contract (except in cases of extreme urgency) which would increase the cost of the contract by more than 15% of the original price, Kerala shall inform the Association and the Bank of the proposed modification, waiver, extension or change order and the reasons therefor. The Association or the Bank, if it determines that the proposal would be inconsistent with the provisions of this Agreement, shall promptly inform Kerala and state the reasons for its determination.