CONFORMED COPY

CREDIT NUMBER 68o IN

DEVELOPMENT CREDIT AGREEMENT

(Kerala Agricultural Development Project)

between

INDIA

and

INTERNATIONAL DEVELOPMENT ASSOCIATION

Dated April 1, 1977

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DEVELOPMENT CREDIT AGREEMENT

AGREEMENT, dated April 1, 1977, 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) By an agreement of even date herewith between the Asso-

ciation and the State of Kerala, (hereinafter called Kerala),

Kerala has agreed to undertake certain obligations in respect of

the carrying out part of the Project;

(C) By an agreement of even date herewith between the Asso-

ciation and the Agricultural Refinance and Development Corporation,

(hereinafter called ARDC), ARDC has agreed to undertake certain

obligations in respect of the carrying out part of the Project;

and

(D) The Association is willing to make the Credit available

upon the terms and conditions set forth hereinafter and in the

agreements referred to in Recitals (B) and (C) above;

NOW THEREFORE the parties hereto hereby agree as follows:

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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 -f 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 Agree-

ments 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 meanings therein set forth

and the following additional terms have the following meanings:

(a) "Kerala" means the State of Kerala, a State of India,

or any successor thereof;

(b) "ARDC" means Agricultural Refinance and Development

Corporation, a statutory corporation established and organized

under the laws of the Borrower;

(c) "Kerala Project Agreement" means the agreement between

the Association and Kerala of even date herewith as the same may

be amended from time to time;

(d) "ARDC Agreement" means the agreement between the Asso-

ciation and ARDC of even date herewith as the same may be amended

from time to time;

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(e) "Subsidiary Loan Agreement" means the agreement to be

entered into between the Borrower and ARDC pursuant to Section

3.01 (d) hereof, as the same may be amended from time to time;

(f) "SADU" means the Special Agricultural Development Unit,

an administrative unit set up under the Agricultural Production

Commissioner, Kerala;

(g) "PCK" means the Plantation Corporation of Kerala Ltd.,

a corporation established and organized under the Companies Act

of 1956 of the Borrower;

(h) "CRMS" means Cooperative Rubber Marketing Societies, reg-

istered under the Kerala Cooperative Societies Act of 1969;

(i) "KRMF" means Kerala State Cooperative Rubber Marketing

Federation Ltd., registered under the Kerala Cooperative Societies

Act of 1969;

(j) "IRB" means Indian Rubber Board, a statutory board estab-

lished and organized under the Rubber Act of 1947 of the Borrower;

(k) "CPCRI" means Central Plantation Crops Research

Institute;

(1) "KAU" means Kerala Agricultural University, a univer-

sity established and organized under the Kerala Agricultural Uni-

versity Act, 1971;

(m) "KDOA" means Kerala Department of Agriculture;

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(n) "KSEB" means Kerala State Electricity Board;

(0) "PCC" means Project Coordination Committee

referred to under Section 3.08 hereof; and

(p) "Participating Bank" means any bank listed in

the Second Schedule to the Reserve Bank of India Act of 1934

and the Kerala Cooperative Central Land Mortgage Bank including

the Primary Land Mortgage Banks.

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ARTICLE II

The Credit

Section 2.01. The Association agrees to lend to the Borrower,on the terms and conditions in this Agreement set forth or re-

ferred to, an amount in various currencies equivalent to thirty

million dollars ($30,000,000).

Section 2.02. The amount of the Credit may be withdrawn from

the Credit Account in accordance with the provisions of Schedule

1 to this Agreement, as such Schedule may be amended from time totime by agreement between the Borrower and the Association, for

expenditures made (or, if the Association shall so agree, to bemade) 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,contracts for the purchase of goods or for civil works to be fi-

nanced out of the proceeds of the Credit, shall be procured in

accordance with the provisions set forth in Schedule 3 to this

Agreement.

Section 2.04. The Closing Date shall be March 31, 1985or 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 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 semi-annually

on May 1, and November 1, in each year.

Section 2.07. The Borrower shall repay the principal amount

of the Credit in semi-annual installments payable on each May 1,

and November 1, commencing May 1, 1987, and ending November 1, 2026,

each installment to and including the installment payable on

November 1, 1996 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. (a) The Borrower shall carry out or cause to

be carried out the Project with due diligence and efficiency and

in conformity with appropriate administrative, financial, agricul-

tural and engineering practices and shall provide or cause to be

provided, promptly as needed the funds, facilities, services and

other resources required for the purpose.

(b) Without any limitation or restriction upon any of its

other obligations under this Agreement, the Borrower shall cause

Kerala and ARDC to perform in accordance with the provisions of

the Kerala Project Agreement and ARDC Agreement, respectively,

all the obligations therein set forth with respect to the Project,

shall take and cause to be taken all action including the provi-

sion of funds, facilities, services and other resources, necessary

or appropriate to enable Kerala and ARDC to perform such obliga-

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

would prevent or interfere with such performance.

(c) In order to assist Kerala, IRB and CPCRI in carrying

out Parts A through E of the Project, the Borrower shall make

available to Kerala, IRB and CPCRI in accordance with the Bor-

rower's standard arrangements for development assistance to

the States and Agencies of India proceeds of the Credit required

by each of them to carry out its respective Parts of the Project.

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(d) The Torrower shall enter into a Subsidiary Loan Agree-

ment with ARDC on the terms and conditions (including inter alia

those set forth in Schedule 4 to this Agreement), satisfactory

to the Association for the purpose of lending to ARDC sums out of

the proceeds of the credit sufficient for ARDC to carry out its

obligations in respect of Part F of the Project. The Borrower

shall exercise its rights under the Subsidiary Loan Agreement,

in such manner as to protect the interest of the Borrower and

the Association and to accomplish the purpose of the Credit

and, except as the Association shall otherwise agree, the Borrower

shall not assign, amend, abrogate or vaive the Subsidiary Loan

Agreement or any provision thereof.

Section 3.02. (a) The Borrower shall cause CPCRI to employ

technical consultants, whose qualifications, experience and terms

and conditions of employment shall be mutually agreed between

the Borrower and the Association, to assist CPCRI in carrying

out the agricultural research under Part E of the Project.

(b) The Borrower shall cause IRB to employ consultants, whose

qualifications, experience and terms and conditions of employment

shall be mutually agreed between the Borrower and the Association,

to be responsible for planning, designing and supervising the

construction and commissioning of the crumb rubber processing

factories under Part D of the Project.

(c) The Borrower shall cause IRB to employ a crumb rubber

processing consultant, whose qualifications, experience and terms

and conditions of employment shall be mutually agreed between

the Borrower and the Association, to perform advisory services

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needed for the operation of the crumb rubber processing factories

to be constructed under Part D of the Project.

(d) The Borrower shall arrange with Kerala and IRB for the

overseas training of at least five crumb rubber factory managers

and about three senior executives of IRB, after consultation withthe Association with respect to the training arrangements.

Section 3.03. (a) Before the sites and construction schedules

of the new crumb rubber processing factories are fixed, the

Borrower shall cause IRB to arrange with Kerala, CRMS and KRMF to

consult with the Association.

(b) After the factories have been constructed, the Borrower

shall take all necessary action to assure that they are staffed

by personnel deemed by IRB to be qualified and adequate in number.

Section 3.04. (a) The Borrower shall cause CPCRI to appoint

and maintain qualified and adequate staff in order to carry out

Part E of the Project efficiently.

(b) The Borrower shall cause IRB to establish a Rubber Pro-

cessing Department and to appoint and maintain qualified and

adequate staff. The chief executive of the Rubber Processing

Department shall be appointed by March 31, 1977 or such later

date as may be agreed by the Association.

Section 3.05. (a) The Borrower shall cause IRB and CPCRI to:

(i) maintain records adequate to record the progress of the Proj-

ect (including the cost thereof) and to identify the goods and

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services financed out of the proceeds of the Credit made avail-

able to them by the Borrower, and to disclose the use thereof in

the Project; (ii) without limitation upon the provisions of para-

graph (b) of this Section, enable the Association's representa-

tives to visit the facilities and construction sites included in

the Project and to examine the goods financed out of such proceeds

and any relevant records and documents; (iii) furnish to the Asso-

ciation all such information as the Association shall reasonably

request concerning the Project, the expenditure of the proceeds of

the Credit so made available to them and the goods and services

financed out of such proceeds; and (iv) prepare and furnish to

the Association, annual work programs and cost estimates relating

to the Project not later than two months prior to the beginning

of their respective fiscal years.

(b) The Borrower shall cause IRB and CPCRI to enable the

Association's representatives to examine all plants, installations,

sites, works, buildings, property and equipment and any relevant

records and documents relating to the Project.

Section 3.06. The Borrower shall cause IRB and CPCRI to: (i)

have an annual audit satisfactory to the Association made of their

accounts and financial statements relating to the Project (state-

ments of income and expenses and related statements) for each

fiscal year, in accordance with sound auditing principles consis-

tently applied, by independent and qualified auditors; (ii)

furnish to the Association as soon as available, but in any case

not later than five months after the end of each such year,

(A) certified copies of their financial statements for such year

as so audited and (B) the report of such audit by said auditors,

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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 accounts and financial statements

and the audit thereof as the Association shall from time to time

reasonably request.

Section 3.07. (a) The Borrower shall cause to be insured the

imported goods to be financed out of the proceeds of the Credit

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.

(b) Except as the Association -hall otherwise agree, the

Borrower shall cause all goods and services financed out of the

proceeds of the Credit to be used exclusively for the Project.

Section 3.08. (a) The Borrower shall, for the purpose of

overall coordination of the Project, cause Kerala to establish

PCC under the chairmanship of the Agricultural Production Commis-

sioner of Kerala. The members of PCC shall include representatives

of the Borrower, Departments of Agriculture and Cooperation

of Kerala, SADU, ARDC, PCK, IRB and CPCRI.

(b) PCC shall cause to be prepared and furnished to the

Association, ,uarterly progress reports in respect of all Parts

of the Project not later than one month after the end of each

quarter.

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ARTICLE IV

Remedies of the Association

Section 4.01. For the purposes of Section 6.02 of the General

Conditions the following additional events are specified pursuant

to paragraph (h) thereof:

(a) Kerala shall have failed to perform any of its obliga-

tions under the Kerala Project Agreement;

(b) ARDC shall have failed to perform any of its obligations

under the ARDC Agreement or under the Subsidiary Loan Agreement;

(c) an extraordinary situation shall have arisen which shall

make it improbable that (i) Kerala will be able to perform its

obligations under the Kerala Project Agreement; or (ii) ARDC

will be able to perform its obligations under the ARDC Agreement

or under the Subsidiary Loan Agreement;

(d) ARDC shall have become unable to pay any of its debts

as they mature or any action or proceeding shall have been taken

by ARDC or by others whereby any of the property of ARDC shall

or may be distributed among its creditors; and

(e) the Borrower or any other authority having jurisdictionshall have taken any action for the dissolution or disestablish-

ment of ARDC or for the suspension of the operations of ARDC.

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Section 4.02. For the purposes of Section 7.01 of the General

Conditions, the following additional events are specified pursuant

to paragraph (d) thereof:

(a) any event specified in paragraphs (a) and (b) of

Section 4.01 hereof shall occur and shall continue for a period

of 60 days after notice thereof shall have been given by the

Association to the Borrower; and

(b) any event specified in paragraphs (d) and (e) of Sec-

tion 4.01 hereof shall occur.

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ARTICLE V

Effective Date; Termination

Section 5.01. The following events are specified as additional

conditions to the effectiveness of this Agreement within the mean-

ing of Section 12.01(b) of the General. Conditions:

(a) the execution and delivery of the Kerala Project Agree-

ment on behalf of Kerala have been duly authorized or ratified by

all necessary governmental action;

(b) the execution and delivery of the ARDC Agreement on be-

half of ARDC have been duly authorized or ratified by all necessary

corporate action;

(c) the execution and delivery of the Subsidiary Loan Agree-

ment on behalf of the Borrower and ARDC, respectively, have been

duly authorized or ratified by all necessary corporate and govern-

mental action; and

(d) a banking development plan satisfactory to the

Association to ensure adequate banking arrangements for Part F

(i) and (ii) of the Project has been prepared by ARDC.

Section 5.02. 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:

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(a) that the Kerala Project Agreement has been duly autho-

rized or ratified by and executed and delivered on behalf of

Kerala and such Agreement is legally binding upon Kerala in

accordance with its terms;

(b) that the ARDC Agreement has been duly authorized or

ratified by, and executed and delivered on behalf of ARDC and

is legally binding upon ARDC in accordance with its terms; and

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

rized or ratified by, and executed and delivered on behalf of,

the Borrower and ARDC, and is legally binding upon the Borrower and

ARDC in accordance with its terms.

Section 5.04. The date July 1, 1977, is hereby specified

for the purposes of Section 12.04 of the General Conditions.

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ARTICLE VI

Representative of the Borrower; Addresses

Section 6.01. Any Secretary, Additional Secretary, Joint

Secretary, Director or Deputy Secretary to the Government of Indis.

in the Ministry of Finance of the Borrower is designated as re-

presentative of the Borrower for the purposes of Section 11.03

of the General Conditions.

Section 6.02. 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 IndiaMinistry of FinanceDepartment of Economic AffairsNew Delhi, India

Cable address:

ECOFAIRSNew Delhi, India

For the Association:

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

Cable address:

INDEVASWashington, D.C.

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IN WITNESS WHEREOF, the parties hereto, acting through their

representatives thereunto duly authorized, have caused this Agree-

ment 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.

INDIA

By Is/ Kewal SinghAuthorized Representative

INTERNATIONAL DEVELOPMENT ASSOCIATION

By /s/ Ernest SternRegional Vice President

South Asia

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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 amount of the Credit to each Category and the percentage of

expenditures for items so to be financed in each Category:

Credit Allocated % of(Expressed in Expenditures

Category Dollar Equivalent) to be Financed

(1) Equipment andmaterials: 1,000,000

(a) directly imported 100% of foreignexoenditures

(b) locally manufac- 100% of localtured expenditures

(ex-factory price)

(c) locally procured 50%

(2) (a) Equipment for new 1,650,000 100% of foreigncrumb rubber expenditures orfactories 100% of local

expenditures (ex-factory price)or 50%

(b) Civil works for 350,000 50%new crumb rubberfactories

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Credit Allocated % of(Epressed in Expenditures

Category Dollar Equivalent) to be Financed

(c) Expansioncost ofPalai factory:

(i) Equipment 80,000 100% of foreignand mate- expenditures orrials 100% of local

expenditures(ex-factory price)or 50%

(ii) Civil works 20,000 50%

(d) marketing facil- 150,000 50%ities

(3) Technical assistanceand overseas training:

(a) rubber process- 375,000 100%ing

(b) agricultural 200,000 100%research

(4) Loans disbursed 17,300,000 50%to farmers and KSEB

(5) Civil works anddevelopment costs:

(a) cashew devel- 1,000,000 50%opment

(b) seed gardens 350,000 50%

(6) Other civil works 200,000 50%under Parts A andE of the Project

(7) Unallocated 7,325,000

TOTAL 30,000,000

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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 thanthe 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 compli-

ance 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 re-

spect 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. (a) Notwithstanding the provisions of paragraph 1 above, no

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

itures prior to the date of this Agreement.

(b) In respect of Part D of the Project, under Categories

(2) and (3) (a) of this Schedule, no withdrawal shall be made

unless the condition under Section 3.02 (b) hereof is fulfilled.

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(c) In respect of Part B of the Project, under Category (5)

(a) of this Schedule, no withdrawal shall be made unless the

condition under Section 2.08 of the Kerala Project Agreement is

fulfilled.

(d) In respect of Part C of the Project under Category (5)

(b) of this Schedule, no withdrawal shall be made unless the

condition under Section 2.09 of the Kerala Project Agreement is

fulfilled.

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 Cate-

gory, the Association may, by notice to the Borrower: (i) reallo-

cate 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; and (ii) if such realloca-

tion cannot fully meet the estimated shortfall, reduce the dis-

bursement 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 expendi-

tures for such item shall be financed out of the proceeds of the

Credit and the Association may, without in any way restricting or

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limiting any other right, power or remedy of the Association under

this 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 following Parts:

Part A: Area development by planting new high-yielding

coconut and pepper, rehabilitation and replant-

ing of coconut and pepper, provision of minor

irrigation facilities, inter-cropping in coconut

areas with cocoa, fodder for dairy cattle, and

various garden crops and dairy cattle development

in Cannanore, Kozhikode, Malappuram, Trivandrum,

Idukki and Kottayam districts, to be implemented

by SADU through participating farmers.

Part B: Rehabilitation of cashew plantation of 2,280 ha,

planting of new high yielding cashew in 1,470 ha

and establishment of a pilot plant for processing

cashew apple, to be undertaken by PCK in Cannanore

district.

Part C: Establishment of about 450 ha seed gardens for coconut,

cashew, cocoa and spices, to be undertaken by SADU.

Part D: Construction of about nine crumb rubber processing

factories by CRMS or KRMF, expansion of the

Palai CRMS crumb rubber factory, with the technical

assistance of IRB, and the provision for quality

control and marketing facilities.

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Part E: Agricultural research to be undertaken by CPCRI and KAU.

Part F: (i) A credit program in consultation with

SADU to finance the long-term credit

need of participating farmers and KSEB

for electric reticulation for irrigation pump-

sets under Part A above.

(ii) A credit program in consultation with PCK

for the cashew development under Part B

above.

(iii) A credit program for the construction of

about nine crumb rubber processing factories

by CRMS or KRMF, for the expansion of the

Palai CRMS crumb rubber factory and marketing

facilities.

These credit programs shall be refinanced by ARDC.

* * *

The Project is expected to be completed by March 31, 1984.

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SCHEDULE 3

Procurement

A. International Competitive Bidding

Except as provided in Part B hereof, contracts for the pur-

chase of goods or for civil works shall be procured in accordance

with procedures consistent with those set forth in Part A of the

"Guidelines for Procurement under World Bank Loans and IDA Credits"

published by the Bank in August 1975 (hereinafter called the Guide-

lines), on the basis of international competitive bidding.

B. Other Procurement Procedures

1. Procurement relating to on-farm development for cashew plan-

tation and seed gardens under Parts B and C of the Project shall

be carried out by force account of PCK and SADU respectively.

2. All other civil works of the Project shall be contracted for

by competitive bidding on the basis of local advertising or other

local procurement procedures satisfactory to the Association.

3. Equipment for the expansion of Palai crumb rubber processing

factory, farm equipment, vehicles, laboratory and office supplies

and equipment under Parts A, B, C and E of the Project which cannot

be grouped into packages of $100,000 or more shall be procured

in accordance with the local procurement procedures satisfactory

to the Association.

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C. Evaluation and Comparison of Bids for Goods; Preference forDomestic Manufacturers

1. For the purpose of evaluation and comparison of bids for the

supply of goods except those to be procured in accordance with

local procedures: (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 to CRMS or KRMF 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 pref-

erence in accordance with, and subject to, the following pro-

visions:

(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.

(b) After evaluation, responsive bids will be classified in

one of the following three groups:

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(1) Group A: bids offering goods manufactured in India

if the bidder shall have established to the satis-

faction of CRMS or KRMF 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 evalu-

ated 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 fur-

ther comparison only, an amount equal to (i) the amount of cus-

toms 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

- 28 -

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 (c) is the

lowest evaluated bid, shall be selected.

D. Review of Procurement Decisions by the Association

1. Review of invitations to bid and of proposed awards and final

contracts:

With respect to all contracts for equipment and civil works,

included under Category 2(a) and (b) of the table set forth in

Schedule 1 to this Agreement, and all contractss for goods and/or

services estimated to cost the equivalent of $200,000 or more:

(a) Before bids are invited, the Borrower shall cause to

be furnished to the Association, for its comments, the text of

the invitations to bid and the specifications and other bidding

documents, together with a description of the advertising proce-

dures to be followed for the bidding, and shall make such modi-

fications 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.

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(b) After bids have been received and evaluated, the Bor-

rower 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 shall furnish to the Association, in suffi-

cient 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 state the reasons for such determination.

(c) The terms and conditions of the contract shall not, with-

out the Association's concurrence, materially differ from those on

which bids were asked.

(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 with-

drawal of funds from the Credit Account in respect of such contract.

2. With respect to each contract to be financed out of the pro-

ceeds of the Credit and not governed by the preceding paragraph,

the Borrower shall cause to 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, two conformed

copies of such contract, together with the analysis of the respec-

tive 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 state the reasons for such determination.

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SCHEDULE 4

Principal Lending Terms and Conditions

1. Borrower to ARDC:

(a) For ARDC refinancing for up to nine years:

(i) annual interest rate of 6.75% minimum, less

0.25% for prompt payment; and

(ii) repayment at the end of nine years.

(b) For ARDC refinancing for more than nine and up to

fifteen years:

(i) annual interest rate of 7.25% minimum, less

0.25% for prompt payment; and

(ii) repayment at the end of fifteen years; and

(c) Borrower to carry exchange risk.

2. ARDC to Participating Bank:

(a) Annual interest rate of not less than 7.5% to

Participating Bank;

(b) Installment repayments to coincide with agreed

collection dates from ultimate borrowers; and

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(c) ARDC to refinance Participating Bank by loans not

exceeding 90% of individual loans for minor irrigation,

and not exceeding 80% of loans for other purposes.

3. Participating Bank to Ultimate Borrowers:

(a) For coconut and pepper area development under Part A

of the Project:

(i) relending is for the rehabilitation of coconut

and pepper plantation and coconut new plantings

in Cannanore, Kozhikode, Malappuram, Trivandrum,

Kottayam and Idukki districts;

(ii) a loan ceiling of 95% of the costs of investment;

(iii) annual interest rate of not less then 10.5%; and

(iv) repayment period not exceeding fifteen years in-

cluding a grace period not exceeding seven years

from the date of each withdrawal.

(b) For electric reticulation for irrigation under Part A

of the Project:

(i) relending is for KSEB for electric reticulation

of irrigation pumpsets;

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(ii) annual interest rate of not less than 10.5%;

(iii) repayment period not exceeding seven years from

the date of each withdrawal; and

(iv) Kerala to guarantee the repayment of principal

and interest by KSEB.

(c) for cashew development:

(i) relending is for PCK to undertake cashew

development in Cannanore district under

Part B of the Project;

(ii) a loan ceiling of 85% of the investment cost

of PCK;

(iii) annual interest rate of not less than 11%; and

(iv) repayment period not exceeding fifteen years

from the date of each withdrawal.

(d) for crumb rubber processing factories:

(i) relending is for CBMS or KRMF as described in

Part D of the Project;

(ii) a loan ceiling of 85% of the cost;

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(iii) annual interest rate of not less than 11%; and

(iv) repayment period not to exceed ten years includ-

ing a grace period not exceeding four years from

the date of each withdrawal.

. General:

(a) ARDC and Participating Bank to maintain separate accounts

for each of the above financing schemes.

(b) Security to be in accordance with arrangements between

Participating Bank and ARDC.

(c) ARDC to refinance on the basis of feasibility studies.

(d) ARDC will provide the Association with the investment

feasibility report in respect of the factories under

Part D of the Project for review.