]C CREDIT NUMBER 1125 IN

Development Credit Agreement(Hazira Fertilizer Project)

between

INDIA

and

INTERNATIONAL DEVELOPMENT ASSOCIATION

Dated ,1981

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CREDIT NUMBER 1125 IN

DEVELOPMENT CREDIT AGREEMENT

AGREEMENT, dated UCtQA-XPV /, 1981, 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) the Project will be carried out by Krishak Bharati

Cooperative Limited (hereinafter called KRIBHCO) with the Bor-

rower's assistance and, as part of such assistance, the Borrower

will make available to KRIBHCO the proceeds of

the Credit as

hereinafter provided;

(C) by arrangements agreed between the Borrower and

the

Indian Farmers Fertilizer Cooperative Limited (hereinafter called

IFFCO), IFFCO has agreed to subscribe an amount of Rs.

one billion

to the equity of KRIBRCO; and

WHEREAS the Association has agreed, on the basis inter

alia of the foregoing, to extend the Credit to the Borrower upon

the terms and conditions hereinafter set forth and in the Project

Agreement of even date herewith between the Association and

KRIBHCO.

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 June 30, 1980,

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 and in the Preamble to this Agreement have

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the respective meanings therein set forth and the followingadditional terms have the following meanings:

(a) "KRIBHCO" means the Krishak Bharati Cooperative Limited,a multi-unit cooperative society registered under the DelhiCooperative Societies Act 1972 (Act No. 35 of 1972);

(b) "Project Agreement" means the agreement between theAssociation and KRIBHCO of even date herewith, as the same may beamended from time to time, and such term includes all schedules tothe Project Agreement and all agreements supplemental to theProject Agreement;

(c) "Subsidiary Loan Agreement" means the agreement tobe entered into between the Borrower and KRIBHCO pursuant toSection 3.01 (b) of this Agreement, as the same may be amendedfrom time to time, and such term includes all schedules to theSubsidiary Loan Agreement;

(d) "Cooperative Societies" means the cooperative societiesregistered as such under any State or Central Act for the timebeing in force in India; and

(e) "Rs." means rupees in the currency of the Borrower.

ARTICLE II

The Credit

Section 2.01. The Association agrees to lend to the Borrower,on the terms and conditions in the Development Credit Agreementset forth or referred to, an amount in various currencies equiva-lent to three hundred twenty-one million five hundred thousandSpecial Drawing Rights (DR 321.500,000).

Section 2.02. The amount of the Credit may be withdrawn fromthe Credit Account in accordance with the provisions of Schedule1 to this Agreement, as such Schedule may be amended from time totime by ag,.eement between the Borrower and the Association, forexpenditures made (or, if the Association shall so agree, to bemade) in respect of the reasonable cost of goods and servicesrequired for the Project and to be financed out of the proceedsof the Credit.

Section 2.03. Except as the Association shall otherwise

agree, procurement of the goods to be financed out of the

proceeds of the Credit, shall be governed by the provisions

set forth or referred to in Section 2.03 of the Project Agree-

ment.

Section 2.04. The Closing Date shall June 30, 1986 or

such later date as the Association shall establish. The Associa-

tion shall promptly notify the Borrower of such later date.

Section 2.05. The Borrower shall pay to the Association a

service charge at the rate of three-fourths of one per cent (3/4

of 1%) per annum on the principal amount of the Credit withdrawn

and outstanding from time to time.

Section 2.06.. Service charges shall be payable semiannually

on May 15 and November 15 in each year.

Section 2.07. The Borrower shall repay the principal amount

of the Credit in semiannual installments payable on each May 15

and November 15 commencing May 15, 1991, and ending November 15,

2030, each installment to and including the installment payable

on November 15, 2000, 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 States of America

is hereby specified for the purposes of Section 4.02 of the

General Conditions.

C. ARTICLE III

Execution of the Project

Section 3.01. (a) Without any limitation or restriction

upon any of its other obligations under the Development Credit

Agreement, the Borrower shall cause KRIBHCO to perform in accor-

dance with the provisions of the Project Agreement and the

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 KRIBHCO to perform such obliga-

tions, and shall not take or permit to be taken any action which

would prevent or interfere with such performance.

..

(b) The Borrower shall relend the proceeds of the Credit toKRIBHCO under a Subsidiary Loan Agreement to be entered intobetween the Borrower and KRIBHCO under terms and conditionsacceptable to the Association which shall include, inter alia, thefollowing:

(i) an effective interest rate of not less than 10.75%per annum; and(ii) repayment over 15 years including 5 years of grace.(c) The Borrower shall exercise its rights under the

Subsidiary Loan Agreement in such manner as to protect theinterests of the Borrower and the Association and to accomplishthe purposes of the Credit, and except as the Association shallotherwise agree, the Borrower shall not assign, amend, abrogate orwaive the Subsidiary Loan Agreement or any provision thereof.Section 3.02. Without limitation or restriction upon theprovisions of Secticn 3.01 of this Agreement, the Borrower speci-fically undertakes to make available to KRIBHCO: (i) as and whenrequired, an equity contribution of at least Rs. 2,300,000,000;(ii) such other equity as may be required to cover the gap, ifany, from insufficient equity contributions received from IFFCOand other Cooperative Societies; and (iii) promptly as needed,funds equal to the difference, if any, between the funds referredto in Section 2.01 (b) of the Project Agreement and the actualamounts contracted by KRIBHCO for the Project.

ARTICLE IV

Other Covenants

Section 4.01. The Borrower shall not take or cause to be'taken any action which, assuming production under conditions ofefficient operation, would prevent fertilizer manufacturers in theterritories of the Borrower from meeting their expenses andservicing debt out of their revenues, and from earning a reason-able return on invested capital.

Section 4.02. The Borrower shall, by January 31, 1984 orsuch other date as the Association may agree, ensure adequate andtimely supply of gas for the Project, and to that end, shall takeor cause to be taken all action, including the provision of funds,facilities, services and other resources necessary or appropriatefor the completion of a gas project in accordance with a scheduleagreed with the Association.

Section 4.03. (a) The Borrower shall take, or cause to be

taken, all action necessary to provide road and railway facilities

adequate for the supply of coal to the Project site, and for the

movement of finished products to be manufactured under the Pro-

ject.

(b) The Borrower shall take adequate measures for distribu-

tion of fertilizer and to regulate railway operations related to

the fertilizer industry to ensure the efficient movement of the

Project input and output.

(c) The Borrower shall cause to be completed in time for the

Project a railway spur connecting the Project site to Udhna

Junction Railway Station.

Section 4.04. (a) When, with respect to any goods to be

financed out of the proceeds of the Credit, the lowest evaluated

bid is for goods manufactured from outside of India, the Borrower

shall promptly grant permission to import the goods covered by the

contract, and no review of such permission to import shall be made

by the Borrower or by any of its agencies, and all foreign ex-

change required therefor shall be promptly made available.

(b) When, with respect to any goods to be financed out

of the proceeds of the Credit, the lowest evaluated bid is for

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, 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.

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) KRIBHCO shall have failed to perform any covenant,

agreement or obligation under the Project Agreement or the Subsid-

iary Loan Agreement;

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(b) a change shall have been made in the Memorandum andArticles of Association or in the by-laws of KRIBHCO without theAssociation's consent which would materially and adversely affectthe financial condition or operation of KRIBHCO;

(c) a subsidiary or any other entity shall have been createdor acquired or taken over by KRIZ3CO without the Association'sconsent, if such creation, acquisition or taking over wouldmaterially and adversely affect the conduct of KRIBHCO's businessor KRIBHCO's financial condition or the efficiency of KRIBHCO'smanagement and personnel or the carrying out of the Project;

(d) an effective resolution shall have been passed forwinding up of KRIBHCO; and

(e) an extraordinary situation shall have arisen which shallmake it improbable that KRIBHCO will be able to perform its obli-gations under the Project Agreement.

Section 5.02. For the purposes of Section 7.01 of the GeneralConditions, the following additional events are specified pursuantto paragraph (d) thereof:

(a) any event specified in paragraphs (a), (b) or (c)of Section 5.01 of this Agreement shall occur and shall continuefor a period of 60 days after notice thereof shall have bLeigiven by the Association to the Borrower and KRIBHCO;and

(b) the event specified in paragraph (d) of Section 5.01 ofthis Agreement shall occur.

ARTICLE VI

Effective Date; Termination

Section 6.01. The following event is specified as an addi-tional condition to the effectiveness of the Development CreditAgreement within the meaning of Section 12.01 (b) of the GeneralConditions, namely, that the Subsidiary Loan Agreement has beenexecuted on behalf of the Borrower and KRIBHCO.

Section 6.02. The following are specified as additionalmatters, within the meaning of Section 12.02 (b) of the GeneralConditions, to be included in the opinion or opinions to befurnished to the Association:

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(a) that the Project Agreement has been duly authorized

or ratified by KRIBHCO, and is legally binding upon KRIBHCO in

accordance with its terms; and

(b) that the Subsidiary Loan Agreement has been duly autho-

rized or ratified by the Borrower and KRIBHCO and is legally

binding upon the Borrower and KRIBHCO in accordance with its

terms.

Section 6.03. The date " is hereby speci-

fied for the purposes of Section 12.04 of the General Conditions.

Section 6.04. The obligations of the Borrower under Sections

4.01 and 4.03 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 twenty years after the date of this Agreement, whichever

shall be the earlier.

ARTICLE VII

Representative of the Borrower; Addresses

i 7.01. Any Secretary, Additional Secretary, Joint

Secretary, Director, Deputy Secretary or Under Secretary in the

Department of Economic Affairs of the Ministry of Finance 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 FinanceDepartment of Economic AffairsNew Delhi 110001, India

Cable address:

ECOFAIRSNew Delhi

For the Association:

International Development Association1818 H Street, N.W,Washington, D.C. 20433United States of America

Cable addre;s:

INDEVASWashington, D.C.

IN WITNESS WHEREOF, the parties hereto, acting through theirrepresentatives thereunto duly authorized, have caused thisAgreement to be signed in their respective names in the Districtof Columbia, United States of America, as of the day and yearfirst above written.

INDIA

By

Authorized Representative

INTERNATIONAL DEVELOPMENT ASSOCIATION

By .

x Regional Vice PresidentSouth Asia

SCHEDULE 1

Withdrawal of the Proceeds of the Credit

1. The table below sets forth the Categories of items to be

financed out of the proceeds of the Credit, the allocation of the

amounts of the Credit to each Category and the percentage of

expenditures for items so to be financed in each Category:

Amount of theCredit Allocated % of(Expressed in Expenditures

Category SDR Equivalent) to be Financed

(1) Equipment, materials 257,200,000 100% of foreign

and spares expenditures,100% of local

expenditures(ex-factory)and 70% ofother local

expenditures

(2) Consultants' services 32,150,000 100%

(3) Unallocated 32,150,000

TOTAL 321,500,000

2. For the purposes of this Schedule:

(a) the term "foreign expenditures" means expenditures

in the currency of any 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 com-

pliance 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 go,-ds 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 1 above, no

withdrawals shall be made in respect of payments made for expen-

ditures prior to the date of this Agreement, except that with-

drawals, in an aggregate amount not exceeding the equivalent of

$15,000,000 may be made on account of payments made for such

expenditures before that date but after October 1, 1980.

5. Notwithstanding the allocation of an amount of the Credit

or the disbursement percentages set forth in the table in

paragraph 1 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 expendi-

tures, ar (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 Associatiun 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 Deve-opment 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.

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SCHEDULE 2

Description of the Project

The Project consists of the design, construction and start-up

of a fertilizer plant at Hazira on the Northern bank of river

Tapti in the State of Gujarat, as follows:

Acquisition, construction and installation of: (i) two

single-train ammonia units, based on natural gas from the SouthBassein gas fields, with a capacity of about 1,350 metric tons per

day each; (ii) four urea units with a capacity of about 1,100

metric tons per day each; (iii) three steam generation plants with

a capacity of about 275 metric tons per hour each; (iv) two power

generation plants with a capacity of 15 MW each; (v) ammonia

storage facilities for about 20,000 metric tons; (vi) urea bagging

facilities; (vii) silos for about 90,000 metric tons of bulk

storage; (viii) a township; and (ix) offsite facilities for

workshops, gas terminal plant, water treatment plant, administra-tion building, laboratories and other facilities.

* * *

The Project is expected to be completed* by October 31,

1985.

* The Project will be deemed completed only when the facilities

included therein shall have been in satisfactory operationfor not less than 60 consecutive days at an average produc-tion rate per day of not less than 80% of its respectivedaily capacity stated above.

INTERNATIONAL DEVELOPMENT ASSOCIATION

CERTIFICATE

I hereby certify that the foregoing is a true

copy of the original in the archives of the Interna-

tional Development Association.

In witness whereof I have signed this Certifi-

cate and affixed the Seal of the Association

thereunto the 2g ?Lday of

198

FOR SECRETARY