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CONFORMED COPY
CREDIT NUMBER 520 IN
Project Agreement(Sindri Fertilizer Project)
BETWEEN
INTERNATIONAL DEVELOPMENT ASSOCIATION
AND
FERTILIZER CORPORATION OF INDIA
DATED DECEMBER 18, 1974
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CONFORMED COPY
CREDIT NUMBER 520 IN
Project Agreement(Sindri Fertilizer Project)
BETWEEN
INTERNATIONAL DEVELOPMENT ASSOCIATION
AND
FERTILIZER CORPORATION OF INDIA
DATED DECEMBER 18, 1974
PROJECT AGREEMENT
AGREEMENT, dated December 18, 1974, between INTERNATIONAL
DEVELOPMENT ASSOCIATION (hereinafter called the Association) and
FERTILIZER CORPORATION OF INDIA (hereinafter called FCI).
WHEREAS 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 ninety-one million dollars ($91,000,000),
on the terms and conditions set forth in the Development Credit Agreement, but
only on condition that FCI agree to undertake such obligations toward the
Association as hereinafter set forth;
WHEREAS by a subsidiary loan agreement to be entered into between the
Borrower and FCI, the proceeds of the credit provided for under the Development
Credit Agreement will be made available to FCI on the terms and conditions therein
set forth; and
WHEREAS FCI, in consideration of the Association's entering into the
Development Credit 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 1.01. 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 (as so defined) have the respective meanings therein
set forth.
ARTICLE II
Execution of the Project
Section 2.01. FCI shall 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 and engineering practices, and
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shall provide, or cause to be provided, promptly as needed, the funds, facilities,services and other resources required for the purpose.
Section 2.02. In order to assist FCI in process and engineering design,procurement, construction and start-up, FCI shall obtain licenses and plant designsand engage consultant services acceptable to the Association upon terms and
conditions satisfactory to the Association.
Section 2.03. Except as the Association shall otherwise agree, FCI shall:
(a) in carrying out the Project, act as managing contractor and employcompetent and experienced contractors, as necessary, to carry out any part ofthe Project;
(b) employ, for the duration of the Project, a suitably qualified and
experienced Project Manager to be responsible for the execution of the Project,including, inter alia, budget and schedule control and general engineering,procurement, and construction duties, and provide the Project Manager withadequate staff and facilities to carry out such functions; and
(c) consult with the Association before making any change in the positionof th: Project Manager in the Sindri Unit.
Section 2.04. (a) Except as the Association shall otherwise agree, the goods,
works and services (other than consultants' services) for the Project to be financedout of the proceeds of the Credit, shall be procured in accordance with theprovisions of Schedule I to this Agreement.
(b) If at any time the Association or FCI determines, after consultationwith each other and the Borrower, that any equipment or material cannot bedelivered on or prior to its scheduled delivery date, and that such delay wouldadversely affect completion of the Project, FCI shall promptly take necessary actionto procure such equipment or material by such procedures as shall be satisfactoryto the Borrower and the Association.
Section 2.05. (a) FCI undertakes to insure, or make adequate provision forthe insurance of, the imported goods to be financed out of the proceeds of theCredit relent to it by the Borrower against hazards incident to the acquisition,transportation and delivery thereof to the place of use or installation, and forsuch insurance any indemnity shall be payable in a currency freely usable by FCIto replace or repair such goods.
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(b) Except as the Association may otherwise agree, FCI shall cause all
goods and services financed out of the proceeds of the Credit relent to it by theBorrower to be used exclusively for the Project.
Section 2.06. (a) FCI shall furnish to the Association 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 shall reasonably request.
(b) FCI: (i) shall maintain records adequate to record the progress of the
Project (including the cost thereof) and to identify the goods and services financed
out of the proceeds of the Credit relent to it by the Borrower, and to disclosethe use thereof in the Project- (ii) shall, without limitation upon the provisionsof paragraph (c) of this Section, enable the Association's representatives to visitthe facilities and construction sites included in the Project, and to examine thegoods financed out of such proceeds and any relevant records and documents:and (iii) shall furnish to the Association all such information as the Associationshall reasonably request concerning the Project, the expenditure of the proceedsof the Credit relent to it and the goods and services financed out of such proceeds.
(c) FCI shall enable the Association's representatives to examine all plants,installations, sites, works, buildings, property and equipment of FCI and anyrelevant records and documents.
Section 2.07. FCI shall use its best endeavors to carry out the Project:
(i) in accordance with a critical path network set forth in theDrawing No. CPM-IE-1017 of FCI, submitted to and approvedby the Association and, in that regard, shall give special attentionto the timely procurement of critical equipment; and
(ii) in accordance with an implementation plan set forth in SindriFertilizer Project Implementation Plan dated October 10, 1974,submitted to and approved by the Association.
Section 2.08. Except as the Association shall otherwise agree, FCI shall:
(a) complete the Sindri Renovation Program prior to June 30, 1977:
(b) prior to December 31, 1975, make arrangements satisfactory to theAssociation with appropriate agencies and corporations for the supply of heavy
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fuel oil, phosphate rock, water and coal, to ensure the timely availability of such
supplies in sufficient quantity and of appropriate quality for the full utilization
of the facilities at the Sindri Unit after completion of the Project; and
(c) prior to February 28, 1975, engage consultants for undertaking a studyentitled Works Transformation and Environmental Study of the Sindri Unit, setforth in the document dated October 10, 1974 submitted to and approved bythe Association. FCI shall consult with the Association with a view to theimplementation of recommendations arising from the said study in a form andin accordance with a schedule satisfactory to the Association.
Section 2.09. FCI shall duly perform all its obligations under the SubsidiaryLoan Agreement. Except as the Association shall otherwise agree, FCI shall nottake or concur in any action which would have the effect of amending, abrogating,assigning or waiving the Subsidiary Loan Agreement or any provision thereof.
Section 2.10. (a) FCI shall at the request of the Association, exchange viewswith the Association with regard to the progress of the Project, the performanceof its obligations tinder this Agreement and under the Subsidiary Loan Agreement,and other matters relating to the purposes of the Credit.
(b) FCI shall promptly inform the Association of any condition whichinterferes or threatens to interfere with, the progress of the Project, the
accomplishment of the purposes of the Credit, or the performance by FCI of itsobligations under this Agreement and under the Subsidiary Loan Agreement.
Section 2.11. FCI shall take all measures necessary to ensure that theexecution and operation of the Project is carried out with due regard to ecologicaland environmental factors, and shall comply with the environmental qualitystandards satisfactory to the Association.
ARTICLE III
Management and Operations of FCI
Section 3.01. FCI shall take out and maintain with responsible insurers, ormake other provision satisfactory to the Association for, insurance against suchrisks and in such amounts as shall be consistent with appropriate practice.
Section 3.02. FCi shall:
(a) at all times manage its affairs, maintain its financial position, plan itsfuture expansion and carry on its operations in accordance with appropriate
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business, financial and engineering practices and under the supervision of
experienced and competent management assisted by adequate and competent staff;
(b) promptly staff with experienced and competent personnel any vacant
position related to the construction and operation of the facilities under the Project;
and
(c) appoint, after consultation with the Association, a suitably qualified
successor if it appears that a vacancy will occur in the position of the General
Manager of the Sindri Unit.
Section 3.03. Except as the Association shall otherwise agree, FCl shall:
(a) at all times take all steps which are necessary to maintain its existence
and its right to carry on operations and to acquire and retain ownership of all
lands and to maintain and renew all interests in land and other properties and
all rights, powers, privileges and franchises which are necessary or useful in the
carrying out of the Project or in the conduct of its business;
(b) at all times operate and maintain its plants, machinery, equipment and
other property, and promptly make all necessary repairs and renewals thereof, in
accordance with appropriate engineering practices;
(c) not sell, lease, transfer or otherwise dispose of' any of its property
or assets which shall be required for the efficient operation of its business and
undertaking; and
(d) not alter its corporate structure or amend its Memorandum or Articles
of Association in any way that will materially and adversely affect its ability to
perform its obligations under this Agreement.
Section 3.04. In the event of any operational problems after start-up of the
facilities constructed under the Project, FCI shall secure such outside operational
assistance as necessary, in consultation with the Association.
ARTICLE IV
Financial Covenants
Section 4.01. FCI shall maintain records adequate to reflect in accordance
with consistently maintained appropriate accounting practices its operations and
financial condition.
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Section 4.02. FCI shall: (i) have the Sindri Unit's and FC1's accounts andfinancial statements (balance sheets, statements of income and expenses and relatedstatements) for each fiscal year audited, in accordance with sound auditingprinciples consistently applied, by independent auditors acceptable to theAssociation; (ii) except as the Association shall otherwise agree, furnish to theAssociation as soon as available, but in any case not later than four months afterthe end of each such year, (A) certified copies of the financial statements forsuch year as so audited and (B) the report of such audit by said auditors, ofsuch scope and in such detail as the Association shall have reasonably requested;and (iii) furnish to the Association such other information concerning the accountsand financial statements of the Sindri Unit and FCL and the audit thereof as theAssociation shall from time to time reasonably request.
Section 4.03. Except as the Association shall otherwise agree, FCL shall:
(a) maintain separate accounts for the Sindri Unit and consolidatedaccounts for all FCI's operations; and
(b) furnish to the Association as soon as available, but in any case notlater than 30 days after the end of each quarter and fiscal year:
(i) quarterly consolidated financial statements (balance sheets,statements of income and expenses and cash flow) for FCI;
(ii) quarterly financial statements (balance sheets, statements ofincome and expenses, cash flow and related statements) for theSindri Unit; and
(iii) quarterly and annual forecast statements of production, incomeand cash flow for FCI and for the Sindri Unit.
Section 4.04. Except as the Association shall otherwise agree:
(a) FCI shall take all necessary steps, including in particular limiting itsindebtedness, to maintain a debt-equity ratio not greater than 50:50 for the SindriUnit and also for FCI on a consolidated basis.
(b) FCI shall: (i) maintain a ratio of current assets to current liabilities(hereinafter referred to as current ratio) of at least 1.2: 1; (ii) not declare dividendsor prepay any debt if, after the payment of such dividend (assuming such paymentwas made on the date of such declaration) or debt, FCl's current ratio shall beless than 1.5:1; and (iii) not cause or permit its Sindri Unit to prepay any of
9
its outstanding debts or to transfer amounts from its accounts to the rest of FC1's
accounts, if such prepayment or transfer would reduce the Sindri Unit's current
ratio below 1.2: 1.
For the purpose of this Section:
(i) the term "debt" means any debt maturing by its terms more
than twelve months after the date on which it is originally
incurred;
(ii) the term "equity" means all unimpaired paid-in share capital
plus accumulated earnings or losses from prior fiscal years not
set apart for specific purposes;
(iii) 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
(iv) 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 indebtedness falling due within one year.
ARTICLE V
Effective Date; Termination;Cancellation and Suspension
Section 5.01. This Agreement shall come into force and effect on the date
upon which the Development Credit Agreement becomes effective.
Section 5.02. (a) This Agreement and all obligations of the Association and
of FCI thereunder shall terminate on the earlier of the following two dates:
(i) the date on which the Development Credit Agreement shall
terminate in accordance with its terns' or
(ii) a date 16 years after the date of this Agreement.
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(b) If the Development Credit Agreement terminates in accordance with
its terms before the date specified in paragraph (a)(ii) of this Section, the
Association shall promptly notify FCI of this event.
Section 5.03. All the provisions of this Agreement shall continue in full force
and effect notwithstanding any cancellation or suspension under the Development
Credit Agreement.
ARTICLE VI
Miscellaneous Provisions
Section 6.01. 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 shall be in writing. Such notice or request shall be deemed
to have been duly given or made when it shall be delivered by hand or by mail,
telegram, cable, 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 Association1818 H Street, N.W.Washington, D.C. 20433United States of America
Cable address:
INDEVASWashington, D.C.
For FC1:
Fertilizer Corporation of India
F-43 South Extension Area Part IRing RoadNew Delhi - 49, India
Cable address:
FERTILIZERNew Delhi
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Section 6.02. Any action required or permitted to be taken, and any
documents required or permitted to be executed, under this Agreement on behalf
of FCI may be taken or executed by its Managing Director or such other person
or persons as FCI shall designate in writing.
Section 6.03. FCI shall furnish to the Association sufficient evidence of the
authority and the authenticated specimen signature of the person or persons who
will, on behalf of FCI take any action or execute any documents required or
permitted to be taken or executed by FCI pursuant to any of the provisions of
this Agreement.
Section 6.04. This Agreement may be executed in several counterparts, each
of which shall be an original, and all collectively but one instrument.
IN WITNESS WHEREOF, the parties hereto, acting through their
representatives thereunto duly authorized, have caused this Agreement to be signed
in their respective names in the District of Columbia, United States of America,
as of the day and year first above written.
INTERNATIONAL DEVELOPMENT ASSOCIATION
By Is / M. L. WeinerRegional Vice President
South Asia
FERTILIZER CORPORATION OF INDIA
By /s / T. N. KaulAuthorized Representative
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SCHEDULE 1
Procurement
A. General Procedures
1. Contracts shall be let under 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, except as
provided hereunder.
2. Contracts for the procurement of (i) items proprietory or critical to the
process design, (ii) items or groups of items with limited sources of availability
whose timely supply is critical to efficient execution of the Project, and (iii) items
or groups of items estimated to cost the equivalent of $50,000 or less may be
placed after obtaining quotations from a restricted list of suppliers, provided that
prior approval of the Association is obtained for said items and, in respect of
(i) and (ii) above, for the list of suppliers.
3. Except as the Association shall otherwise agree, FCI shall prequalify all
bidders.
B. Evaluation and Comparison of Bids for 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-suppled goods, shall be excluded; and (iii) the
cost to the Borrower 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
that will be followed in the evaluation and comparison of bids.
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(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, eycluding 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. The lowest evaluated bid of
each group 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 151/ 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 lowest evaluated bid from group C shall be selected.
C. Review of Procurement Decisions by Association
1. Except as provided for in paragraph A.2 above, FCI shall, before initiating
procurement for equipment and materials, including qualification of suppliers,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.
2. With respect to all contracts for equipment or materials estimated to cost
the equivalent of S300,000 or more:
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(a) FCI shall furnish to the Association, in sufficient time for its
comments, but not being later than the date upon which invitations to bid are
issued, the text of the invitations to bid and the specifications and other bidding
documents, 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.
(b) After bids have been received and evaluated, FCI 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, together with the
recommendation for award 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 .FCI 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.
3. With respect to each contract to be financed out of the proceeds of the
Credit and not governed by the preceding paragraph, FCI 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, in
the case of any such contract estimated to cost the equivalent of $50,000 or more,with copies of the tender documents, 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 FCI and
state the reasons for such determination.
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