Development Credit Agreement

Public Disclosure Authorized CREDIT NUMBER 598 IN CONFORMED COPY Public Disclosure Authorized Development Credit Agreement (Fertilizer Industry Project) Public Disclosure Authorized BETWEEN INDIA AND INTERNATIONAL DEVELOPMENT ASSOCIATION Public Disclosure Authorized DATED DECEMBER 31, 1975

CONFORMED COPY CREDIT NUMBER 598 IN Development Credit Agreement (Fertilizer Industry Project) BETWEEN INDIA AND INTERNATIONAL DEVELOPMENT ASSOCIATION DATED DECEMBER 31, 1975

DEVELOPMENT CREDIT AGREEMENT AGREEMENT, dated December 31, 1975, between INDIA, acting by its President (hereinafter called the Borrower) and INTERNATIONAL DEVELOPMENT ASSOCIATION (hereinafter called the Association). WHEREAS (A) The Borrower has requested the Association to assist in the financing of the Project described in Schedule 2 to this Agreement by extending the Credit as hereinafter provided; (B) Part A of the Project will be carried out by the Fertilizer Corporation of India with the Borrower's assistance and, as part of such assistance, the Borrower will make available to the Fertilizer Corporation of India part of the proceeds of the Credit as hereinafter provided; (C) Part B of th- Project will be carried out through the Industrial Development Bank of India with the Borrower's assistance and, as part of such assistance, the Borrower will make available to the Industrial Development Bank of India part of the proceeds of the Credit as hereinafter provided; and (D) The Association is willing to make the Credit available upon the terms and conditions set forth hereinafter, in a project agreement of even date herewith between the Association and the Fertilizer Corporation of India, and in a project agreement of even date herewith between the Association and the Industrial Development Bank of India; NOW THEREFORE the parties hereto hereby agree as follows: ARTICLE I General Conditions; Definitions Section 1.01. The parties to this Agreement accept all the provisions of the General Conditions Applicable to Development Credit Agreements of the Association, dated March 15, 1974, with the same force and effect as if they were fully set forth herein (said General Conditions Applicable to Development Credit Agreements of the Association being hereinafter called the General Conditions). Section 1.02. Wherever used in this Agreement, unless the context otherwise requires, the several terms defined in the General Conditions have the respective

4 meanings therein set forth and thc following additional terms have the following meanings: (a) "FCI" means the Fertilizer Corporation of India, a company registered under the Companies Act, 1956, as amended, of the Borrower; (b) "IDBI" means the Industrial Development Bank of India, a body corporate established under the Industrial Development Bank of India Act, No. 18 of 1964, as amended, of the Borrower; (c) "FCI Project Agreement" means the agreement between the Association and FCI of even date herewith, as the same may be amended from time to time, and such term includes all schedules to the FCI Project Agreement and all agreements supplemental to the FCI Project Agreement; (d) "IDBI Project Agreement" means the agreement between the Association and IDBI of even date herewith, as the same may be amended from time to time and such term includes all agreements supplemental to the IDBI Project Agreement; (e) "FCI Subsidiary Loan Agreement" means the agreement to be entered into between the Borrower and FCI pursuant to Section 3.03(a) of this Agreement, as the same may be amended from time to time, and such term includes all schedules to the FCI Subsidiary Loan Agreement; (f) "IDBI Subsidiary Loan Agreement" means the agreement to be entered into between the Borrower and IDBI pursuant to Section 3.03(b) of this Agreement, as the same may be amended from time to time, and such term includes all schedules to the IDBI Subsidiary Loan Agreement; (g) (h) (i) "Neyveli" means Neyveli Lignite Corporation Limited; "Hindustan Steel" means Hindustan Steel Limited; "GSFC" means Gujarat State Fertilizers Company Limited; (j) "SPIC" means Southern Petrochemical Industries Corporation and includes any company promoted by SPIC and incorporated under the laws of the Borrower for the purpose of setting up facilities for the manufacture of soda ash and ammonium chloride at Tuticorn in the State of Tamil Nadu; (k) "HPCL" means Hindustan Petroleum Company Limited;

5 (1) "Coromandel" means Coromandel Fertilizers Limited; (m) (n) "Madras Fertilizers" means Madras Fertilizers Limited; "Zuari" means Zuari Agro-chemicals Limited; and (o) "Beneficiary" means each of the entities specified in (a) and (g) througih (n) above to the extent that such entity will receive a specified portion of the proceeds of the Credit or foreign exchange equivalent. ARTICLE II The Credit Section 2.01. The Association agrees to lend to the Borrower, on the terms and conditions in the Development Credit Agreement set forth or referred to, an amount in various currencies equivalent to one hundred five million dollars ($105,000,000). Section 2.02. The amount of the Credit may be withdrawn from the Credit Account in accordance with the provisions of Schedule I to this Agreement, as such Schedule may be amended from time to time by agreement between the Borrower and the Association, for expenditures made (or, if the Association shall so agree, to be made) in respect of the reasonable cost of goods and services required for the Project and to be financed out of the proceeds of the Credit. Section 2.03. Except as the Association shall otherwise agree, the goods, works or services (other than consultants' services) for the Project to be financed out of the proceeds of the Credit, shall be procured in accordance with the provisions set forth or referred to in Schedule 3 to this Agreement. Section 2.04. The Closing Date shall be June 30, 1980 or such later date as the Association shall establish. The Association shall promptly notify the Borrower of such later date. Section 2.05. The Borrower shall pay to the Association a service charge at the rate of three-fourths of one per cent (3/4 of V",) per annum on the principal amount of the Credit withdrawn and outstanding from time to time. Section 2.06. Service charges shall be payable semi-annually on January 15 and July 15 in each year.

6 Section 2.07. The Borrower shall repay the principal amount of the Credit in semi-annual installments payable on each January 15 and July 15 commencing January 15, 1986, and ending July 15, 2025, each installment to and including the installment payable on July 15, 1995 to be one-half of one per cent (1/2 of 1%) of such principal amount, and each installment thereafter to be one and one-half per cent (1-1/2%) of such principal amount. Section 2.08. The currency of the United Kingdom of Great Britain and Northern Ireland is hereby specified for the purposes of Section 4.02 of the General Conditions. ARTICLE III Execution of the Project Section 3.01. The Borrower shall carry out or cause to be carried out Part C of the Project with due diligence and efficiency and in conformity with appropriate administrative and financial practices, and shall provide or cause to be provided, promptly as needed, the funds, facilities, services and other resources required for the purpose. Section 3.02. Without any limitation or restriction upon any of its other obligations under the Development Credit Agreement, the Borrower shall cause FCI to perform in accordance with the provisions of the FCI Project Agreement and the FCI Subsidiary Loan Agreement all the obligations therein set forth, shall cause IDBI to perform in accordance with the provisions of the IDBI Project Agreement and the IDBI Subsidiary Loan Agreement all the obligations therein set forth, shall take and cause to be taken all action, including the provision of funds, facilities, services and other resources, necessary or appropriate to enable FCI and IDBI to perform such obligations, and shall not take or cause or permit any of its political subdivisions or any of its agencies or any agency of any such political subdivisions to take any action which would prevent or interfere with such performance by FCI and IDBI. Section 3.03. (a) To carry out Part A of the Project, the Borrower shall relend to FCI, out of the proceeds of the Credit, funds equivalent to the amount allocated in sub-category (a) of Category (1) of the table set forth in paragraph I of Schedule 1 to this Agreement under a subsidiary loan agreement to be entered into between the Borrower and FCI under terms and conditions acceptable to the Association which shall include, inter alia, the following: (i) the loan will be repaid by FC1 to the Borrower within 15 years, including 4 years of grace; and

7 (ii) interest, including special charges, if any, shall be paid on the outstanding balance from time to time at the rate of ten and one-half per cent (10-1/2%) per annum less a rebate of one-quarter of one per cent (1/4 of 1') for prompt payment of debt service. (b) To carry out Part B of the Project, the Borrower shall relend to IDBI, out of the proceeds of the Credit, funds equivalent to the amounts allocated in sub-categories (d) through (g) of Category (1) of the table set forth in paragraph I of Schedule I to this Agreement under a subsidiary loan agreement to be entered into between the Borrower and IDBI under terms and conditions acceptable to the Association which shall include, inter alia, the following: (i) (ii) the loan will be repaid by IDBI to the Borrower within 15 years, including 4 years of grace; and interest, including special charges, if any, shall be paid on the outstanding balance from time to time at the rate of eight and one-half per cent (8-1/2%) per annum. (c) The Borrower shall exercise its rights under the FCI and IDBI Subsidiary Loan Agreements in such manner as to protect the interests of the Borrower and the Association and to accomplish the purposes of the Credit, and except as the Association shall otherwise agree, the Borrower shall not assign, nor amend, abrogate or waive the FCI and IDBI Subsidiary Loan Agreements or any provision thereof. (d) In order to carry out Part C(i) and (ii) of the Project, the Borrower shall, (i) make available to Neyveli and Hindustan Steel, out of the proceeds of the Credit, funds equivalent to the amounts allocated in sub-categories (b) and (c), respectively, of Category (I) of the table set forth in paragriph I of Schedule I to this Agreement, in the form of equity; and (ii) cause FCI to be appointed as the engineering contractor on terms and conditions satisfactory to the Association. (e) In order to carry out Part C(iii) and (iv) of the Project, the Borrower shall make available to Coromandel and Madras Fertilizers foreign exchange equivalent to the amounts allocated in sub-categories (h) and (i), respectively, of Category 1 of the table set forth in paragraph I of Schedule I to this Agreement. Section 3.04. (a) Where a contract is awarded for the supply for the Project of goods manufactured outside India, the Borrower shall immediately grant permission to import the goods covered by the contract, and no reviews of such

8 permission to import shall be made by the Borrower or by any of its agencies, and all foreign exchange required therefor shall be promptly made available. (b) Where a contract is awarded for the supply for the Project of goods manufactured in India, the Borrower shall (i) promptly upon receipt of the appropriate applications, issue, or cause to be issued, such import licenses as shall be. required to implement the contract; (ii) make available, or cause to be made available, promptly as needed, all foreign exchange which shall be required therefor; and (iii) with respect to locally produced materials which are subject to allocation, make, or cause to be made, allocations of such materials promptly and in such quantities as shall be required for such contract. (c) If at any time the Association or any of the Beneficiaries determines after consultation with each other and the Borrower that any equipment or material to be financed from the proceeds of the Credit cannot be delivered on or prior to its scheduled delivery date and that such delay would adversely affect the completion of the Project, the Borrower shall promptly take all necessary action to permit such Beneficiary to procure such equipment or material by such procedures as shall be satisfactory to the Association. Section 3.05. The Borrower shall obtain from Neyveli, Hindustan Steel, Coromandel and Madras Fertilizers an undertaking acceptable to the Association: (a) to carry out their respective Parts of the Project with due diligence and efficiency and in conformity with sound engineering, financial and administrative practices; (b) to employ, if required, engineering consultants whose qualifications, experience and terms and conditions of employment shall be satisfactory to the Association; (c) to procure equipment, spares and materials to be financed out of the proceeds of the Credit, or equivalent foreign exchange made available to them by the Borrower, in accordance with Schedule 3 to this Agreement and to use such goods exclusively in the carrying out of their respective parts of the Project; (d) to furnish to the Association through the Borrower promptly upon their preparation, the plans, specifications, reports, contract documents and construction and procurement schedules for their respective Parts of the Project and any material modifications subsequently made therein, in such detail as the Association shall from time to time request;

9 (e) to maintain- records adequate to identify the goods and services acquired out of the proceeds of the Credit or equivalent foreign exchange made available to them by the Borrower, to disclose the use thereof in the Project, to record the progress of their respective Parts of the Project (including the cost thereof) and to reflect in accordance with consistently maintained sound accounting practices their operations and financial condition; (f) to allow the Association's representatives to inspect their respective Parts of the Project and the goods financed out of the proceeds of the Credit or the foreign exchange made available under the Project, and to examine all plants, installations, sites, works, buildings, property and equipment included in the Project, the operation thereof and any relevant records and documents; (g) to insure with responsible insurers, or make adequate provision for the insurance of, the imported goods to be financed out of the proceeds of the Credit or the foreign exchange made available to them 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 to replace or repair such goods; (h) to take out and maintain with responsible insurers, or make other provisions satisfactory to the Association for, insurance against such risks and in such amounts as shall be consistent with appropriate practice; (i) to inform the Borrower and the Association promptly of any condition which interferes with, or threatens to interfere with, the accomplishment of the purposes of 'the Credit or the carrying out of their respective Parts of the Project; (j) to give all such information as the Association shall reasonably request relating to their financial condition, operation and administration; (k) to furnish to the Association all such information as the Association shall reasonably request concerning their respective Parts of the Project, the expenditure of the proceeds of the Credit or the foreign exchange made available to them by the Borrower and the goods and services financed out of such proceeds or such foreign exchange; and (1) to (i) have their accounts and financial statements (balance sheets, statements of income and expenses and related statements) for each fiscal year audited, in accordance with sound auditing principles consistently applied, by independent auditors acceptable to the Association; (ii) furnish to the Association

10 as soon as available, but, in any case not later than four months after the end of each such year, (A) certified copies of their financial statements for such year as so audited and (B) report of such audit by said auditors, of such scope and in such detail as the Association shall have reasonably requested; and (iii) furnish to the Association such other information concerning the foregoing accounts and financial statements as the Association shall from time to time reasonably request. ARTICLE IV Other Covenants Section 4.01. (a) The Borrower shall, not later than April 1 and October 1 in each year, furnish to the Association progress reports on the provision of funds by the Borrower for all ongoing fertilizer projects in the public sector. (b) The Borrower shall cause to be taken all action necessary to maintain FCI in a sound financial condition. Section 4.02. The Borrower shall by March 31, 1977, or such other date as the Association may agree, cause to be completed a study, in accordance with terms of reference satisfactory to the Association, of demand for fertilizer in the territories of the Borrower, including a ten year forecast, and shall cause to be established suitable procedures to update said forecast annually for a minimum period of ten years. Section 4.03. In order to coordinate and advise on the Borrower's policies relating to the fertilizer sector, the Borrower shall promptly establish, and maintain, a high-level authority. Section 4.04. The Borrower shall by June 30, 1976, or such other date as the Association may agree, cause to be completed a study of the transportation of raw materials and products related to the fertilizer industry, and shall implement the recommendations of said study in consultation with the Association on priority basis. Section 4.05. The Borrower shall take all necessary measures to improve the management and operations of public sector fertilizer enterprises. Section 4.06. The Borrower shall make arrangements satisfactory to the Association for the supply of all materials, including ammonia and phosphate rock, by permitting imports if and when necessary, in such quantities as shall be adequate to operate the Beneficiaries' plants up to full capacity.

11 Section 4.07. The Borrower shall not take or cause to be taken any action which, assuming production under conditions of efficient operation, would prevent fertilizer manufacturers in the territories of the Borrower from meeting their expenses and servicing debt out of their revenues, and from earning a reasonable return on invested capital. Section 4.08. Except as the Association shall otherwise agree, the Borrower shall, in respect of fertilizer production units managed and operated by Neyveli and Hindustan Steel, take or cause to be taken necessary steps to: (a) maintain separate accounts and furnish to the Association as soon as available, but in any case not later than 30 days after the end of each quarter and fiscal year, (i) quarterly financial statements (balance sheets, statements of income and expenses, cash flow and related statements) and, (ii) quarterly and annual forecast statements of production, income and cash flow; and (b) maintain a ratio of current assets to current liabilities of at least 1.1:1. For the purposes of this Section: (i) (ii) the term "current assets" means stock of spares, cash (excluding advances to contractors for construction of projects and for additions to fixed assets), assets readily convertible into cash, and all other assets which could in the ordinary course of business be converted within one year into cash or assets readily convertible into cash; and the term "current liabilities" means liabilities due and payable and all other liabilities which would be due and payable, or could be called for payment. within one year, including the portion of long-term indebtedness falling due within one year. ARTICLE V Remedies of the Association Section 5.01. For the purposes of Section 6.02 of the General Conditions, the following additional events are specified pursuant to paragraph (h) thereof: (a) FCl shall have failed to perform any covenant, agreement or obligation under the FCI Project Agreement or the FCI Subsidiary Loan Agreement;

12 (b) IDBI shall have failed to perform any covenant, agreement or obligation under the IDBI Project Agreement or the IDBI Subsidiary Loan Agreement; (c) a default shall have occurred on the part of any Beneficiary in the performance of any undertaking referred to in Section 3.05 of this Agreeiment or in Section 2.03 of the IDBI Project Agreement; (d) the Borrower or any other authority having jurisdiction shall have taken any action for the dissolution or disestablishment of FCI or IDBI or for the suspension of their operations; (e) the industrial Development Bank of India Act, No. 18 of 1964, shall have been amended, suspended, abrogated, repealed or waived so as, in the judgement of the Association, to materially and adversely affect the carrying out of any part of the Project or the operations or financial condition of IDBl; (f) IDBI shall have become unable to pay its debts as they mature or any action or proceeding shall have been taken by IDBI or by others whereby any of the property of IDBI shall or may be distributed among its creditors; and (g) an extraordinary situation shall have arisen which shall make it improbable that FCI or IDBI will be able to perform their obligations under the FCI and IDBI Project Agreements, respectively. Section 5.02. For the purposes of Section 7.01 of the General Conditions, the following additional events are specified pursuant to paragraph (d) thereof: (a) the event specified in paragraphs (a), (b) or (c) of Section 5.01 of this Agreement shall occur and shall continue for a period of sixty days after notice thereof shall have been given by the Association to the Borrower, and FCI or IDBI, as the case may be; and (b) the event specified in paragraphs (d), (e) or (f) of Section 5.01 of this Agreement shall occur. ARTICLE VI Effective Date; Termination Section 6.0 1. The following events are specified as additional conditions to the effectiveness of the Development Credit Agreement within the meaning of Section 12.01(b) of the General Conditions:

13 (a) the execution and delivery of the FCI Project Agreement on behalf of FCI have been duly authorized or ratified by all necessary corporate and governmental action; (b) the execution and delivery of the IDBI Project Agreement on behalf of IDBI have been duly authorized or ratified by all necessary corporate and governmental action; and (c) the execution and delivery of the FCI and IDBI Subsidiary Loan Agreements on behalf of the Borrower and FCI and IDBI, respectively, have been duly authorized or ratified by all necessary corporate and governmental action. Section 6.02. The following are specified as additional matters, within the meaning of Section 12.02(b) of the General Conditions, to be included in the opinion or opinions to be furnished to the Association: (a) that the FCI Project Agreement has been duly authorized or ratified by, and executed and delivered on behalf of, FCI, and is legally binding upon FCI in accordance with its terms; (b) that the IDBI Project Agreement has been duly authorized or ratified by, and executed and delivered on behalf of IDBI, and is legally binding upon IDBI in accordance with its terms; and (c) that the FCI and IDBI Subsidiary Loan Agreements have been duly authorized or ratified by, and executed and delivered on behalf of, the Borrower and FCI and IDBI, resp-,-tively, and are legally binding upon the Borrower and FCI and IDBI, respectively, in accordance with their terms. Section 6.03. The date March 1, 1976 is hereby specified for the purposes of Section 12.04 of the General Conditions. Section 6.04. The obligations of the Borrower under Sections 4.01, 4.03, 4.06, 4.07 and 4.08 of this Agreement and the provisions of Section 5.02 of this Agreement shall cease and determine on the date on which the Development Credit Agreement shall terminate or on a date 16 years after the date of this Agreement, whichever shall be the earlier.

14 ARTICLE VII Representative of the Borrower; Addresses Section 7.01. Any Secretary, Additional Secretary, Joint Secretary, Director or Deputy Secretary in the Ministry of Finance, Department of Economic Affairs of the Borrower is designated as representative of the Borrower for the purposes of Section 11.03 of the General Conditions. Section 7.02. The following addresses are specified for the purposes of Section 11.01 of the General Conditions: For the Borrower: The Secretary to the Government of India Ministry of Finance Department of Economic Affairs New Delhi, India Cable address: ECOFAIRS New Delhi For the Association: International Development Association 1818 H Street, N.W. Washington, D.C. 20433 United States of America Cable address: INDEVAS Washington, D.C. IN WITNESS WHEREOF, the parties hereto, acting through their representatives thereunto duly authorized, have caused this Agreement to be signed

15 in their respective names in the District of Columbia, United States of America, as of the day and year first above written. INDIA By /s / G. V. Ramakrishna Authorized Representative INTERNATIONAL DEVELOPMENT ASSOCIATION By /s / Ernest Stern Regional Vice President South Asia

16 SCHEDULE 1 Withdrawal of the Proceeds of the Credit 1. The table below sets forth the Categories of items to be financed out of the proceeds of the Credit, the allocation of the amounts of the Credit to each Category and the percentage of expenditures for items so to be financed in each Category: Amount of the Credit Allocated % of (Expressed in Expenditures Category Dollar Equivalent) to be Financed (1) Equipment, 100% of foreign materials, spares, expenditures or consultants' 100% of local services, foreign expenditures license fees and training for: (a) FCi 36,000,000 (b) Neyveli 1 1,000,000 (c) Hindustan 14,500,000 Steel (d) GSFC 8,000,000 (c) SPIC 13,000,000 (f) HPCL 3,000,000 (g) Zuari 4,000,000 (h) Coromandel 3,000,000 (i) Madras 1,000,000 Fertilizers (j) Borrower 1,000,000 (2) Unallocated 10,500,000 TOTAL 105,000,000

17 2. For the purposes of this Schedule: (a) the term "foreign expenditures" means expenditures in the currency of aay country other than the Borrower and for goods or services supplied from the territory of any country other than the Borrower; and (b) the term "local expenditures" means expenditures in the currency of the Borrower and for goods or services supplied from the territory of the Borrower. 3. The disbursement percentages have been calculated in compliance with the policy of the Association that no proceeds of the Credit shall be disbursed on account of payments for taxes levied by, or in the territory of, the Borrower on goods or services, or on the importation, manufacture, procurement or supply thereof; to that end, if the amount of any such taxes levied on or in respect of any item to be financed out of the proceeds of the Credit decreases or increases, the Association may, by notice to the Borrower, increase or decrease the disbursement percentage then applicable to such item as required to be consistent with the aforementioned policy of the Association. * 4. Notwithstanding the provisions of paragraph I above, no withdrawals shall be made in respect of expenditures: (i) prior to the date of this Agreement, except that withdrawals may be made on account of expenditures incurred after June 1, 1975, in an aggregate amount not exceeding the equivalent of $6,000,000; and (ii) under sub-categories (b) through (i) of Category (I), respectively, until the Association has received the respective undertakings referred to in Section 2.03 of the IDBI Project Agreement and Section 3.05 of this Agreement and it has dispatched to the Borrower notice of its acceptance of said respective undertakings. 5. Notwithstanding the allocation of an amount of the Credit or the disbursement percentages set forth in the table in paragraph I above, if the Association has reasonably estimated that the amount of the Credit then allocated to any Category will be insufficient to finance the agreed percentage of all expenditures in that Category, the Association may, by notice to the Borrower: (i) reallocate to such Category, to the extent required to meet the estimated shortfall, proceeds of the Credit which are then allocated to another Category and which in the opinion of the Association are not needed to meet other expenditures,

18 and (ii) if such reallocation cannot fully meet the estimated shortfall, reduce the disbursement percentage then applicable to such expenditures in order that further withdrawals under such Category may continue until all expenditures thereunder shall have been made. 6. If the Association shall have reasonably determined that the procurement of any item in any Category is inconsistent with the procedures set forth or referred to in this Agreement, no expenditures for such item shall be financed out of the proceeds of the Credit and the Association may, without in any way restricting or limiting any other right, power or remedy of the Association under the Development Credit Agreement, by notice to the Borrower, cancel such amount of the Credit as, in the Association's reasonable opinion, represents the amount of such expenditures which would otherwise have been eligible for financing out of the proceeds of the Credit.

19 SCHEDULE 2 Description of the Project The Project is to assist selected companies in raising production by increasing capacity utilization and improving pollution control. It consists of: Part A. FCI Installation of turbo-generators with total capacity of about 25 MW at FCI's plant at Gorakhpur; installation of a turbo-generator with a capacity of about 15 MW at FCI's plant at Durgapur; installation of a steam generating plant with a capacity of about 170 tons per hour (TPH) at FCI's plant at Trombay; installation of about 25,000 tons capacity of ammonia storage and acquisition and utilization of about 35 tank wagons (of 30 tons capacity each) for transportation of ammonia; establishment of a pollution control wing, acquisition and utilization of pollution control and non-destructive testing equipment and technical training of engineers and staff. Part B. IDBI (i) GSFC - Modernization of the phosphoric acid and ammonia plants, and installation of a fluorine recovery system; (ii) SPIC - Installation of equipment to convert excess ammonia to soda ash and ammonium chloride, and installation of a fluorine recovery system; (iii) HPCL - Reactivation of idle equipment, acquisition and installation of new equipment and expansion of utilities to increase refining capacity from 3.5 to 6.0 million tons per year of crude oil; and

20 (iv) *Zuari - Modernization of ammonia plant and urea pollution control. Part C. The Borrower (i) Neyveli - Conversion from lignite to fuel oil feedstock; (ii) Hindustan Steel - Conversion from coke oven gas to naphtha feedstock; (iii) Coromandel - Installation of a boiler with a capacity of about 45 TPH, a turbo-generator with a capacity of about 5 MW; and flourine recovery system; (iv) Madras Fertilizers - Modernization of ammonia and urea plants; and (v) Borrower - Comprehensive study of fertilizer demand and other project analyses, and technical feasibility studies as the Borrower and the Association may agree. The Project is expected to be completed by December 31, 1979.

21 SCHEDULE 3 Procurement A. General Procedures 1. Except as provided in Part A.3 hereof, goods, works and services shall be procured under contracts to be awarded in accordance with procedures consistent with those set forth in the "Guidelines for Procurement under World Bank Loans and IDA Credits" published by the Bank in April 1972, as revised in October 1972 (hereinafter called the Guidelines), on the basis of international competitive bidding. 2. Bids shall be invited from a list of suppliers acceptable to the Association. 3. Contracts up to an aggregate amount of $20,000,000 equivalent (i) for the procurement of items proprietory to the process design and those with limited sources of availability whose timely supply is critical to efficient execution of the Project, and (ii) estimated to cost the equivalent of $100,000 or less, may be placed after obtaining quotations from appropriate suppliers, provided, that prior approval of the Association is obtained for said items and for the list of suppliers and that the terms and conditions of the contracts so placed are acceptable to the Association. B. Evaluation and Comparison of Bids fbr Goods; Preference for Domestic Manufacturers 1. For the purpose of evaluation and comparison of bids for the supply of goods: (i) bidders shall be required to state in their bid the c.i.f. (port of entry) price for imported goods, or the ex-factory price for domestically-manufactured goods; (ii) customs duties and other import taxes on imported goods, and sales and similar taxes on domestically-supplied goods, shall be excluded; and (iii) the cost of inland freight and other expenditures incidental to the delivery of goods to the place of their use or installation shall be included. 2. Goods manufactured in India may be granted a margin of preference in accordance with, and subject to, the following provisions: (a) All bidding documents for the procurement of goods shall clearly indicate any preference which will be granted, the information required to establish the eligibility of a bid for such preference and the following methods and stages ihat will be followed in the evaluation and comparison of bids.

22 (b) After evaluation, responsive bids will be classified in one of the following three groups: (1) Group A: bids offering goods manufactured in India if the bidder shall have established to the satisfaction of the Borrower and the Association that the manufacturing cost of such goods includes a value added in India equal to at least 20% of the ex-factory bid price of such goods. (2) Group B: all other bids offering goods manufactured in India. (3) Group C: bids offering any other goods. (c) All evaluated bids in each group shall be first compared among themselves, excluding any customs duties and other import taxes on goods to be imported and any sales or similar taxes on goods to be supplied domestically, to determine the lowest evaluated bid of each group. 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. (d) If, as a result of the comparison under paragraph (c) 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 c.i.f. bid price of the imported goods offered in each group C bid, for the purpose of this further comparison only, an amount equal to (i) the amount of customs duties and other import taxes which a non-exempt importer would have to pay for the importation of the goods offered in such group C bid, or (ii) 15% of the c.i.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 nut, the bid from group C which as a result of the comparison under paragraph (c) is the lowest evaluated bid shall be selected. C. Review of Procurement Decisions by Association 1. Before initiating procurement of equipment and materials, including preparation of list of suppliers, the Beneficiaries shall inform the Association in detail of the procedure to be followed and shall introduce such modifications in said procedure as the Association shall reasonably request. The list of selected bidders, together with a statement of their qualifications and of the reasons for the exclusion of any applicant from such list shall be furnished to the Association for its comments before the applicants are notified, and the Beneficiaries shall make such additions to, deletions from, or modifications in, the said list as the Association shall reasonably request.

23 2. Subject to the provisions of paragraph A.3 of this Schedule, with respect to all contracts for equipment and materials estimated to cost the equivalent of $500,000 or more: (a) The Beneficiaries shall furnish to the Association, in sufficient time for its comments (not being later than the date on which invitations to bid are issued), 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 shall reasonably request. Any further modification to the bidding documents shall require the Association's concurrence before it is issued to the prospective bidders. S (b) After bids have been received and evaluated, the Beneficiaries shall, before a final decision on the award is made, inform the Association of the name of the bidder to which it intends to award the contract and the reasons for the intended award and shall furnish to the Association, 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 shall reasonably request. The Association shall, if it determines that the intended award would be inconsistent with the Guidelines or this Schedule, promptly inform the Borrower. and IDBI or FC, as the case may be, and state the reasons for such determination. (c) The terms and conditions of the contract shall not, without the Association's concurrence, materially differ from those on which bids were asked or prequalification invited. (d) Two conformed copies of the contract shall be furnished to the Association promptly after its execution and prior to the submission to the Association of the first application for withdrawal of funds from the Credit Account in respect of such contract. 0 3. With respect to each contract to be financed out of the proceeds of the Credit and not governed by the preceding paragraph, the Borrower shall furnish to the Association, promptly after its execution and prior to the submission to the Association of the first application for withdrawal of funds from the Credit Account in respect of such contract, two conformed copies of such contract, together with the analysis of bids, recommendations for award and such other information as the Association shall reasonably request. The Association shall, if it determines that the award of the contract was not consistent with the Guidelines or this Schedule, promptly inform the Borrower and IDBI or FCI, as the case may be, and state the reasons for such determination.