Document of

The World Bank

FOR OFFICIAL USE ONLY

F t 17 v1o 1 A,4.,/.

Report No. P-3751-IN

REPORT AND RECOMMENDATION

OF THE

PRESIDENT OF THE

INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT

TO THE

EXECUTIVE DIRECTORS

ON A

PROPOSED LOAN

IN AN AMOUNT EQUIVALENT TO US$242.5 MILLION

TO INDIA

FOR THE

CAMBAY BASIN PETROLEUM PROJECT

March 9, 1984

This document has a restricted distribution and may be used by recipients only in the performance oftheir official duties. Its contents may not otherwise be disclosed without World Bank authorization.

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CURRENCY EQUIVALENTS(As of March 7, 1984)

US$1.00 = Rs 10.689726Rs 1.00 = US$0.093548Rs 1 million = US$93,548

The US Dollar/Rupee exchange rate is subject to change.Conversions in the Staff Appraiisal Report were, exceptas otherwise noted, made at the rate of US$1 to Rs 10.0which represents the projected exchange rate over thedisbursement period.

FISCAL YEAR

April 1 - Marcb 31

ABBREVIATIONS AND ACRONYMS USED IN THIS REPORT

API - American Petroleum InstituteBOP - Bombay Offshore ProjectGOI - Government of Indiakm - kilometerLPG - Liquified Petroleum GasMmcmd - Millions of cubic meters per dayNGL - Natural Gas Liquids (or condensate)OIL - Oil India (Limited)ONGC - Oil and Natural Gas CommissionOPEC - Organization of Petroleum Exporting Countriestoe - Tons of oil equivalentERR - Economic Rate of ReturnEOR - Enhanced Oil RecoveryOIDB - Oil Industry Development BankBbl - Barrel (equivalent to 42 US gallons)IOIP - Initial Oil in PlaceSCF - Standard Cubic Feet

FOR OFFICIAL USE ONLY

INDIA

CAMBAY BASIN PETROLEUM PROJECT

LOAN AND PROJECT SUMMARY

Borrower: India, acting by its President.

Beneficiary: Oil and Natural Gas Commission (ONGC)

Amount: US$242.5 million, including the capitalizedfront-end fee of 0.25%.

Terms: Repayment over 20 years, including five years graceat the standard variable interest rate.

On-lending Terms: Government of India (GOI) to ONGC (US$242.5 million).Funds will be onlent to ONGC at a rate of 12%per annum; repayment over a naximum of 15 years,including five years' grace. GOI would bear theforeign exchange and interest rate risks.

Project Description: The purpose of the project would be to assist the Oiland Natural Gas Commission (ONGC) in developingits capabilities for optimizing the production ofexisting, mature oil f-ields--a new area of tech-nology for India's fledgling oil industry. Theproject comprises the preparation and implementa-tion of a US$954 million investment program forincreasing the production of oil and gas from theonshore Cambay Petroleum Basin located in theState of Gujarat in western India.

Specifically, assistance would be provided in(i) exploration - to delineate, by seismic surveyand drilling, the limits of the known producingzones; (ii) development and production - to sub-stantially increase the production of both oil andgas; (iii) enhanced oil recovery - to test alter-native technologies for increasing recoverablereserves; and (iv) technical assistance and train-ing to ensure that ONGC staff acquire the requi-site skills to successfully implement the newmethodologies.

This document has a restricted distribution and may be used by recipients only in the performanceof their official duties. Its contents may not otherwise be disclosed without World Bank authorization.

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Thle principal project risks are those normallyassociated with petroleum exploration anddevelopment, i.e., geological and technological.The geological risks include the possibility thatoil will not be found in commercial quantities inthe deeper zones to be explored. The technologybeing introduced under the project is a blend ofproven, profitable and "leading edge" technologyin such proportions, and with adequate foreigntechnical assistance and training, that the risks- both economic and environmental - are acceptableunder all reasonably expected adverse scenarios.

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Estimated Costs: (US$ millions)Local 1/ Foreign Total

Exploration 19.3 61.7 81.0Development and Production 269.6 319.2 588.8Enhanced Oil Recovery 2.6 5.0 7.6Technical Assistance and Training 2.0 5.0 7.0

Project Base Cost 293.5 390.9 684.4

Physical contingencies 39.7 58.4 98.1

Price contingencies 75.3 95.9 171.2

Total Project Cost 408.5 545.2 953.7

Front-End Fee on IBRD loan --- 0.6 0.6

Total Financing Required 408.5 545.8 954.3

(US$ millions)

Financing Plan: Local Foreign Total

IBRD 242.5 242.5Cofinancing / -- 245.0 245.0ONGC 408.5 58.3 466.8

Total 408.5 545.8 954.3

Estimated Disbursements:

(US$ millions)Bank FY FY84 FY85 FY86 FY87 FY88 FY89 FY90

Annual 0.6 3/ 35.8 60.6 72.8 36.3 24.3 12.1Cumulative 0.6 36.4 97.0 169.8 206.1 230.4 242.5

Economic Rate of Return: About 91% for total project.

Financial Rate of Return: About 18% after taxes.

Appraisal Report: No. 4928-IN, dated March 8, 1984.

1/ Includes an estimated US$150.0 million in duties and taxes.2/ Including Euro-currency borrowings and suppliers' credits.3/ Front-end fee.

I

I

I

INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT

REPORT AND RECOMMENDATION OF THE PRESIDENTTO THE EXECUTIVE DIRECTORS ON A PROPOSEDLOAN FOR THE CAMBAY BASIN PETROLEUM PROJECT

1. I submit the following report and recommendation on a proposedloan for US$242.5 million (equivalent) on standard terms to help financethe improved recovery and production rates of the already producing oilfields in the Cambay Basin in the State of Gujarat in India.

PART I - THE ECONOMY 1/

* Background

2. An economic report, "Economic Situation of India and ResourceMobilization Issues" (4395-IN, dated April 11, 1983), was distributed to theExecutive Directors on April 19, 1983. Country data sheets are attached asAnnex I.

3. India is a large and diverse country with a population of about 700 mil-lion (in mid-1982) and an annual per capita income of US$250. The economy isdominated by agriculture which employs more than two-thirds of the labor force.However, the land base is not sufficient to provide an adequate livelihood toeveryone engaged in agricultural activities, especially those with little or noland. Growth of value-added in agriculture -- 2.2% since 1950/51 -- has beenslower than growth of industrial value-added (5.0% per annum). As a result,there has been a gradual decline in the share of agriculture in GDP (at factorcost) from 60% to just under 40%, while the share of industry rose from 15% toaround 25%. But industrialization has not been rapid enough to absorb thegrowing labor force, or to bring about a rapid economic transformation, withsignificantly higher productivity and income levels. As a result economicgrowth has been slow over the past three decades, averaging about 3.6% perannum since 1950/51.

4. Nevertheless, there has been steady progress with per capita incomerising by about 1.4% per year in the period 1950 to 1980. Despite the largepopulation base and its relatively rapid growth, India has been able toeliminate persistent dependence on foodgrain imports through significantimprovements in agricultural production. Savings and investment have increased

1/ Parts I and II of the report are substantially the same as Parts I andII of the President's Report for the Tamil Nadu Water Supply and SanitationProject (No.P-3741-IN), dated March 1, 1984.

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markedly since 1950/51: gross national savings more than doubled from 10.8% ofGDP (at factor cost) to 22.8% in 19821J83, while gross domestic investment rosefrom 12.5% of GDP to 24.9% in 1982/83., Foreign savings (balance of paymentsdeficit on current account) have never financed a major portion of domesticinvestment: a peak of about 20% was reached d-uring the early 1960s. Surplusesarose for a few years in the late 1970s5 and at the present time, foreignsavings are about 8% of investment. External assistance has been low both as apercentage of GDP and in per capita terms, never rising above 3% of GDP andaveraging below 1% for the past five years. Net foreign savings have neverrisen above 3% of GDP, and presently stands at 2.1%.

5. Before the 1970s, India placed relatively less emphasis on exportpromotion and more on import substitution. The volume growth of exportsbetween 1950/51 and 1969/70 averaged only 2.2% per annum, while the volumegrowth of imports over the same period was 4.3%. In the early to mid-1970s,however, India's terms of trade, which had remained roughly constant during the1960s, deteriorated sharply. In response. tIhe Government introduced variouspolicy measures designed to stimulate exportsc As a result, the volume ofIndia's exports grew on average about 7.3% per a-nnfum for the 1970s as a whole,a performance which demonstrates that sustained rapid growth is possible.While expanding world markets, particularlSy in the nearby Middle East, con-tributed to this growth, liberalized access to imported inputs and more effec-tive export incentives played a major role.

6. Moving into the second half of the 1970s, the Indian economy was buoyedby higher levels of investment and an expanding level of foodgrain output. Asa result, growth in real GDP and in agricultural and industrial value-added,substantially exceeded the historical 30-year trends (paragraph 3) averaging4.9%, 3.9% and 5.6%, respectively. In 1979/80, however, this momentum wasbroken when the worst drought in recent vears, co.mbined with a doubling ofinternational oil prices and domestic supply shiortages, led to a sharp fall infoodgrain production, a declinie "n GDP, and the opening up of a large tradedeficit. Severe inflationary pressures also emerged after several years ofvirtual price stability. These setbacks in 1979/80 coincided with the prepara-tion of the Sixth Five-Year Plan which laid down a program of adjustment thataimed at improving the trade deficit, removing infrastructural bottlenecks andensuring price stability with an overall growth of the economy of 5.2%, 1.6 per-centage points above the trend growth of 3.6%.

Recent Trends

7. In 1980/81 and 1981/82, the economy substant-ally recovered with realGDP growing by 7.9% and 5.2%, respectively. While industrial output expandedby 4% in 1980/81 and 8.6% in 1981/82, recovery was particularly robust inagriculture where normal weather helped output to rise by more than 15% and5.5%, respectively. The availability of power, coal, and rail transport,already improved in 1980/81, was even better in 1981182, recording growth ratesof about: 10%, 9.6% and 12.9%, respectively. The easing of constraints on thesupply of infrastructure and basic commodities was a determining factor in theimprovecl performance of the industrial secto7r This overall improvement in theIndian economy, combined with a more restrictive monetary policy contributed toa sharp decline in the rate of inflation. Wholesale prices rose by about 9% onan average annual basis in 1981/82 and bv only 2.5, in 1982/83, reflecting astrong deceleration from a peak increase of 18% in 1980/81.

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8. After two years of fairly solid performance, the Indian economy faced adifficult year in 1982/83 due to the drought in mid-1982 which brought downthe GDP growth rate to around 2% and put further strains on the already dif-ficult balance of payments and domestic resource situation. Besides a sig-nificant decline in the range of 4.5%-6.5% in agricultural production, GDPgrowth was also constrained by a slowdown in industrial growth from 8.6% in1981/82 to about 4% in 1982/83. This resulted from a combination of severalfactors, notably the decline in agriculture income, persistent (thoughlessened) power shortages, a textile strike in Bombay, as well as depressedexport markets and increased competition from imports. The Government wasable, however, to protect the level of savings to a large extent and keep themomentum of the investment program through largely successful public sectorresource mobilization efforts. Foreign savings played a crucial role in sup-port of this effort. Similarly, t'he timely implementation of various economicpolicies mitigated the otherwise very distressing effects of a poor monsoon.Continued improvements of the infrastructure sectors, although at a slower pacethan in the previous two years, also reduced the negative effects of thedrought.

9. Agricultural production in 1982/83 received a serious setback from thedrought. Foodgrain production, which had reached a record 133 million tons in1981/82, declined to 124-127 million tons. Production of most other majorcrops also declined in 1982/83. Corrected for weather variations, this stillrepresents a creditable performance. In 1979/80, with a broadly comparablemonsoon, foodgrain production reached only 109 million tons. The Governmentwas able to mitigate the effects of the 1982 drought through efficient manage-ment of foodgrain procurement and distribution, careful timing of foodgrainimports, and appropriate allocation of power to irrigation pumps. Thesepolicies helped to avoid disruptions in basic food supplies and contributedto price stability during the year. While the management of the foodgraineconomy after the drought was a significant achievement, the effect of thedrought on production re-emphasized the continued importance of the monsoonin India's agriculture. The performance of the recent past and probable futuretrends suggest that on average foodgrain supplies will meet demand. Thebalance remains delicate, and the need for foodgrain imports to maintain con-sumer supplies or adequate buffer stocks could arise from time to time. Thus,programs to expand irrigation, strengthen extension and encourage the efficientuse of other agricultural inputs continue to receive high priority.

10. Basic infrastructure services performed generally well in 1982/83,although growth of coal, power and rail transport failed to maintain the momen-tum of the marked recovery of 1981/82. Despite lower hydro generation due tothe failure of the monsoon, overall power generation recorded an increase ofabout 7%. This was due largely to an increase in capacity utilization inthermal plants resulting from improved overall management, stabilization ofmost of the new large units and better availability of coal due to the combina-tion of increased coal production and improved railway performance.Nevertheless, power shortages remain the major bottleneck in the economy.Railway traffic grew by only 3.7% in 1982/83 reflecting a slowdown from1981/82. The lower growth was due not to a decline in the operationalefficiency of the railways but rather to slack demand from core sectors likesteel, iron ore, coal washeries and fertilizers. Coal production growth (4% in1982/83), after 10% growth in the two preceding years was creditable. Therewere no major shortages and there were improvements in the quality of coal.Recent easing of shortages and bottlenecks in infrastructure has come primarilyfrom better utilization of existing capacity, but in the future most improve-ment must result from added capacity. It is therefore critically important

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that India maintain the pace of investment in these key sectors and mobilizesufficient resources to do so.

11. The Indian economy has reverted from a situation of resource surplus,which had been a temporary phenomenon of the Late 1970s, to one of resourcescarcity. Investment has again grown quicker than national savings, and thescope for further increases in the latter appears limited. India's grossnational savings rate, which averaged 22.4% of GDP in the last three years, ishigh by any standard, particularly considering India's low income and the largeproportion of its population living below the poverty line. Future increasesin savings will depend heavily upon the enhanced profitability of public sectorenterprises which would reqcuire better utilization of capacity, more efficientoperations and adequate pricing policies. In 1981/82 there was a significantincrease in public savings clue to improved profitability of various publicsector enterprises. This trend which was maintained in 1982/83 needs to beaccelerated. The gap between gross investment: and national savings which rosefrom 0.4% of GDP in 1979/80 to 1.8%, 2.3% and 2.1%, respectively in the firstthree years of the 1980s, has been financed by foreign savings.

12. India's ability to generate resources to meet its development objec-tives has become increasingly linked to the balance of payments. The currentaccount balance which recorded surpluses between 1976/77 and 1978/79, sharplydeteriorated to deficits of nearly US$2.9 bil:Lion in 1980/81 and US$3.8 billionin 1981/82 (1.8% and 2.3% of- GDP, respectively). This was partly due to asharp rise in the oil import: bill as a result of both the disruption of oilproduction in northeast India in 1980 and significant oil price increases, andto a more liberal import policy aimed at prov:iding producers with access toinputs for higher capacity utilization, greater efficiency, improved technologyand capacity expansion. The current account deficit in 1982/83 declined toUS$3.3 billion or 2.1% of GDP. The improvement would have been greater had notth,e drought resulted in the need to rebuild food stocks through imports and atthie same time led to a lower level of GDP growth. This improvement in thebalance of payments is to a significant degree the result of India's develop-ment and adjustment efforts over the past three years. It also reflects are,duction in the trade deficit as compared to the levels reached in 1980/81 and1981/82. The trade deficit declined from US$7.6 billion in 1980/81 to US$6.0billion in 1982/83 due to continued export volume growth (following the sub-stantial resumption in 1981/82) despite poor world market conditions, coupledwith the containment in import growth due to import substitution of petroleumproducts, metals and fertilizers while allowing substantial growth in "other"imports through more liberal import policies. Nevertheless, it is expectedthat the balance of payments will be under strain for the next several years,for India's adjustment program will continue to require high levels of imports.

13. The high investment rate, about 25% of GDP, envisaged in the Sixth Plancoupled with the limited possibilities of raising domestic savings beyond thepresent high levels, necessarily implies a need for external resources. Facedwith a reduction in the availability of bilateral and multilateral concessionalassistance, India has begun to borrow significant amounts on commercial termsfrom the Euro-dollar market in addition to much greater utilization ofsuppliers' and export credits. India's favorable debt service profile hasenabled India to tap commercial capital markets at favorable spreads (overreLatively high underlying rates). In the period 1980-82 India contractedcommercial loans totalling cver US$2,000 million and suppliers' credits ofabout US$520 million. The bulk of the loans are linked to specific development

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projects in the public sector while the credits are linked, by and large, todevelopment projects in the private sector. India also reached an agreementwith the International Monetary Fund for the use of the Extended Fund Facilityfor SDR 5 billion, of which SDR 2.5 billion have already been drawn. Thetransfer of funds under the EFF has stemmed the use of foreign exchange reser-ves which had fallen to less than four months of import coverage in 1981/82.In 1982/83, in addition to continued use of the EFF, financing requirementswere met by increased non-concessional borrowing (about US$2,000 million in newcommittments) and a 10% increase in net aid disbursement.

Development Prospects

14. The experience of recent years illustrates that India has the capacityto grow and develop at a more rapid pace. Although the industrial sector issmall compared to the size of the economy, it nevertheless is large in absoluteterms and has a highly diversified structure-, capable of manufacturing a widevariety of consumer and capital goods. Basic infrastructure -- irrigation,railways, telecommunications, power, roads and ports -- is extensive comparedto many countries, although there is considerable need for additional capacityas well as improvement in the utilization of existing capacity. India is alsowell-endowed with human resources and with institutional infrastructure fordevelopment. Finally, India has an extensive natural resource base in terms ofland, water, and minerals (primarily coal and ferrous ores, but also gas andoil). With good economic policies and reasonable access to foreign savings,India has the capability for managing these considerable resources toaccelerate its long-term growth.

15. The medium-term framework for advancing India's development objectivesis the Sixth Five-Year Plan (1980/81-1984/85), which is now in its fourth year.The Plan assigns priority to agriculture, energy development, the growth ofexports and domestic import substitutes where appropriate, and the removal ofinfrastructural bottlenecks. Overall performance has so far been encouraging,although bottlenecks in key sectors such as power and transport are likely topersist. Moreover, fulfillment of the Plan targets will require additionalresource mobilization. The efforts of the Central Government to raise resour-ces have so far been impressive and are likely to be broadly sufficient to meetthe financing requirements of the Central Government's share in planinvestment, even if some increase in inflation is experienced above current lowlevels. However, a shortfall in public savings is likely to occur in someStates unless further measures are introduced. There will be a need also forcontinuous efforts to maintain the current level of private savings. Recentincreases in interest rates and tax concessions on time deposits and the con-tinued dampening of inflationary expectations should stimulate such savings.

16. The higher capital formation rates of the past few years augur wellfor future income growth. However, returns to investment have so far beenrelatively low. Much of this phenomenon relates to India's stage ofdevelopment, in which a large and growing proportion of investment has beenneeded to build up basic infrastructure. These services, such as power, tran-sport and irrigation, have inherently high capital-output ratios. However,there is scope to improve the sectoral capital-output ratios through greaterefficiency and better management. Bottlenecks in basic infrastructural sectorsclearly can prejudice growth in other sectors where large investments have beenmade. As demonstrated in the last three years, performance in the basic serv-ice sectors can be improved through better planning and management, thus lead-

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ing to higher productivity and capacity utilization throughout the economy.At the same time, programs to expand domestic capacity are vital. In the caseof tradeable commodities like coal, steel and cement, this is justified on thegrounds of comparative advantage. For sectors such as irrigation, power andtransportation, expansion of planned capacity in accordance with the require-ments of the rest of the economy will be vital to overall medium- and long-termdevelopment prospects. In the short term, however, achieving an adequatebalance between supply and demand in these sectors will remain a difficultobjective.

17. Under the Sixth Plan, India has an ambitious oil production programbacked by substantial financial conmiitment. While the gap between domesticconsumption of petroleum and production remains large, the prospects forprogressive substitution of domestic petroleum for imports are quite bright.In 1981, and again in early 1983, resources for exploration and developmentwere raised by successive price increases for domestic crude and products.India's dependence on oil imports dropped from 63% in 1979/80 to about 45% nowand a scheduled expansion in production is expected to decrease oil imports (incrude equivalent terms) to about 33% of consumption by 1984/85. The rapidlyexpanding level of exploration activity, combinied with the possibilities foraccelerated offtake from known fields, offers much encouragement for India'slonger-term energy prospects.

18. Despite an expected continued decline in its current account deficitsfrom the current 2.1% to about 1.7% of GDP by the late 1980s, India willrequire growing access to world financial markets to complement concessionalassistance. These commercial sources of funds wqill be important in the futuresince India's current account deficits, though not large relative to the sizeof the economy, will nevertheless be large in absolute terms and will neces-sitate external borrowing beyond levels expected to be available from normalconcessional sources. Given the favorable structure of India's external debt,which reflects the past reliance on concessional sources, India should remaincreditworthy for a substantial growth in external borrowing.

19. India's development prospects over the next few years will hinge on theextent to which the economy can be brought into both internal and externalbalance, while at the same time achieving more rapid growth than in the past.In the longer term, income growth represents the best strategy for achievingthesie needed adjustments, both by generating higher savings for furtherinvestment, and by fostering the development of export and import-substitutingindustry to improve the balance of payments. In the short term, a relativelylarge external borrowing, including an increased emphasis on commercialborrowing, will be necessary to cope with the balance of payments consequencesof such a growth strategy. Hcowever, an important element in providing Indiawith the capacity to adjust flexibly will be adequate flows of concessionalassistance. Although India is currently in a position to increase borrowingon commercial terms from the very low levels of the past, there are, of course,limits beyond which India will choose to sacrifice growth objectives ratherthan accept debt on unfavorable or unmanageable terms. The Government's effortto maintain an adequate rate of growth while adjusting the structure of theIndian economy to a more open and efficient environment requires foreignresources in addition to the level of commercial borrowing available to India.India is still a very poor country with a large rural sector and enormousinvestment requirements for human development and basic infrastructure. Thefact that India has been able over the past seven years to maintain a rate of

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growth above the long term trend, despite the poor monsoons of 1979/80 and1982/83, lends substance to the hope that a more open trade policy and con-certed efforts to remove constraiints on the growth of productive capacity,supported by adequate mobilization of savings both foreign and domestic, cansustain a rate of growth closer to 5.0% per annum than the long-run trend of3.6% per annum. Combined with a reduction in the rate of population increaseto below 2.0% per annum, a 5.0% growth rate would mean a doubling of the trendrate of growth of per capita income of less than 1.4% per annum. Success inthese efforts would make a significant difference to the prospects of easingpoverty in India.

20. A large and growing population and severe poverty underline the need toaccelerate India's development efforts. The 1981 Census placed India's popula-tion at 683.8 million, or about 12 million higher than official projections.The fact that there was no decline in inter-census rates of population growth,equivalent to about 2.2% per annum, is a cause for concern. While furtheranalysis of the Census may suggest this rate of growth to be slightlyoverestimated, the expectation of a measurable decline in the population growthrate has not materialized. Until the results of the Census are fully analyzed,firm judgements about the reasons for this outcome are not possible. However,the results re-emphasize the need for continuing efforts to strengthen thehealth and family planning program in a broad range of activities and services.These efforts are given high priority in the Sixth Plan, which aims at a risein the proportion of protected couples in the reproductive age group from itsestimated 1979/80 level of about 23% to over 35% by 1984/85.

21. Reduction of poverty remains the central goal of Indian econom.cgrowth. More than one-third of the world's poor live in India, and more than80% of the Indian poor belong to the rural households of landless laborers andsmall farmers. About 51% of the rural population and 40% of the urban popula-tion subsist below the poverty line. Improvements in the living standards ofthe poor will depend to a large extent on the overall growth of the economy,particularly on increases in agricultural production and employment, and innon-farm rural employment. These developments will have to stem in large partfrom market forces which can be encouraged and reinforced by appropriateGovernment policies and the strengthening of basic services and infrastructure.The declining trend in real foodgrain prices between 1970 and 1981, resultingfrom India's sustained effort to raise agricultural production, reflects suchdevelopments. There is also a role for direct Government action in fasterimplementation of land reform (though the scope for significant reduction inpoverty through land redistribution is quite limited in India), in increasingthe supply of credit available to small farmers and rural artisans, and finallyin broadening the provision of those services which enhance the human capitalof the poor and improve living standards. Many of the latter are elements ofthe Minimum Needs Program, which has been an integral part of Indian planningfor the past decade. Progress has been slow but steady in the expansion ofprimary education, the extension of rural health facilities and the provisionof secure village water supplies. Operations such as the community healthvolunteer program and the national adult literacy campaign provide encouragingevidence that well-targetted, relatively low-cost programs can lead to enhancedprospects for India's poor.

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PART II - BANK GROUP OPERATIONS IN INDIA

22. Since 1949, the Bank Group has made 76 loans and 160 developmentcredits to India totalling US$5,183 million and US$11,851 million (both netof cancellation), respectively. Of these amounts, US$1,387 million has beenrepaid, and US$6,224 million was still undisbursed as of September 30, 1983.Ban]k Group disbursements to India in the current fiscal year throughSeptember 30, 1983 totalled IUS$286 million, representing a decrease of about2 percent over the same period last year. Annex II contains a summary state-ment of disbursements as of September 30, 1983

23. Since 1959, IFC has mDade 29 commitments in India totalling US$224million, of which US$30 million has been repaicl, US$56 million sold and US$18million cancelled. Of the balance of US$120 million, US$113 million representsloans and US$8 million equity. A summary statement of IFC disbursements as ofSeptember 30, 1983, is also included in Annex II (page 4).

24. The thrust of Bank Group assistance to India has been consistent withthe country's development objectives in its support of agriculture, energy andinfrastructure. Of particular importance have been investments in irrigation,extiension and on-farm development designed to increase agriculturalproductivity, and efforts to improve the availability of basic agriculturalinputs to farmers through cre!dit, fertilizer, marketing, storage, and seedprojects. Major elements of the lending program have also been directed athelping to meet the energy needs of the economy while curbing the growth of oilimports, and to ease the infrastructure bottlenecks which have hamperedeconomic growth in India, particularly through power generation anddistribution, and railways and telecommunications projects. The Bank Group hasalso provided financing for a broad range of medium- and small-scale industrialentierprises, primarily in the private sector, through its support of develop-ment finance institutions. Recognizing the importance of improving the abilityto satisfy the essential needLs of urban and rural populations, the Bank Grouphas supported nutrition and family planning programs, a rural roads project, aswell as water supply and sewerage and other urban infrastructure projects.

25. This pattern of assistance remains highly relevant, and consonantwith Government priorities, ass reflected in the Sixth Plan. The continuedactive involvement of the Bank Group in agriculture, energy and infrastructuredevelopment will appropriately contribute to India's adjustment and growthprospects. Irrigation will need continuing support, with emphasis on improvedefficiency in water conveyance systems to ensure reliable delivery to farmers'fields. In addition, major investments to develop the large Narmada Riverbasin will be vital to India's efforts to increase agricultural production.Important complements to these efforts, such as fertilizer production anddistribution, agricultural credit and extension, will continue to receivesupport. A continued program of investments aimed at rapidly increasing thedomestic supply of energy will clearly be necessary if India is to curb thecost of oil imports and alleviate the critical power shortages which constrainoutput in both the agricultural and industrial sectors. Exploitation of oiland gas resources is a central element of this program, which should be supple-menczed by investments in hydro and thermal powe!r generation, and in the expan-sioII of the transmission and distribution networks. Industrial projects toincrease the domestic production of basic commodities, which have been in shortsupply and which India has a comparative advantage in producing, should alsoreceive high priority. Finally, raising the efficiency and levels of transpor-

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tation infrastructure would mitigate a key constraint to achieving higherlevels of economic growth so that further support of the railways and for portsdevelopment will be particularly appropriate.

26. The need for a substantial net transfer of external resources insupport of the development of India's economy has been a recurrent theme ofBank economic reports and of the discussions within the India Consortium.Thanks in part to the response of the aid community, India successfullyadjusted to the changed world price situation of the mid-1970s. However, thereis now a need for increased foreign assistance to India, not only to help theeconomy adjust to the more recent oil price increases and the overalldeterioration in the world trade environment but also to maintain the rela-tively higher growth rates achieved during the first two years of the SixthPlan. As in the past, Bank Group assistance for projects in India should aimto include the financing of local expenditures. India imports relatively fewcapital goods because of the capacity and competitiveness of the domesticcapital goods industry. Consequently, the foreign exchange component tends tobe small in most projects. This is particularly the case in such high-prioritysectors as agriculture, irrigation, and water supply.

27. India's poverty and needs are such that whenever possible, externalcapital requirements should be provided on concessionary terms. Accordingly,the bulk of the Bank Group assistance to India has been, and should continue tobe, provided from IDA. However, the amount of IDA funds that can reasonably beallocated to India remains small in relation to India's needs for externalsupport. This requirement for additional assistance can be met, in part,through Bank lending. Given its development prospects and policies, India isjudged credit-worthy for Bank lending to supplement IDA assistance. A con-tinuation of efforts already underway to achieve growth in productive capacity,trade expansion, higher levels of savings, foodgrains self-sufficiency and areduction in the rate of population growth should result in continued economicgrowth and improvement in the balance of payments. Despite recent setbacks,India's external payments position is still manageable. The ratio of India'sdebt service to the level of exports was about 11% in 1982/83 and is projectedto remain below 20% through 1995/96. As of September 30, 1983, outstandingloans to India held by the Bank totalled US$3,932 million, of whichUS$2,100 million remain to be disbursed, leaving a net amount outstanding ofUS$1,832 million.

28. Of the external assistance received by India, the proportion con-tributed by the Bank Group has grown significantly. In 1969/70, the Bank Groupaccounted for 34% of total commitments, 13% of gross disbursements, and 12% ofnet disbursements as compared with 50%, 43% and 53%, respectively, in 1981/82.On March 31, 1982, India's outstanding and disbursed external public debt wasabout US$17.9 billion, of which the Bank Group's share was US$7.1 billion or38% (IDA's US$5.9 billion and IBRD's US$1.2 billion). In 1981/82, about 16.0%of India's total debt service payments were to the Bank Group.

PART III - THE ENERGY SECTOR

General

29. Commercial primary energy (coal, oil, gas, hydro and nuclearpower) accounts for about 46% of total energy consumption in India, withthe balance (54%) being derived from non-commercial sources, predominantlyfirewood and agricultural and animal wastes. Over the past ten years, thegrowth of energy consumption in India averaged 4% per annum, which wasmarginally higher than the GDP growth for the period. Over the sameperiod, commercial energy consumption increased by 5.3% per annum. Percapita consumption of commercial primary energy is about 166 kg of oilequivalent, or half the average for low-income developing countries. Theshare of oil products in commercial primary energy consumption, at 33%, islow compared to other developing countries but is growing rapidly.

30. Coal is the most abundant indigenous energy resource and remainsthe most important domestic source of commercial energy in India. Coalproduction, which stagnated between 1976/77 and 1979/80 because of powershortages, delays in commissioning new mines, labor difficulties andtransportation bottlenecks, has risen substantially from about 104 milliontons in 1979/80 to 131 million tons in 1982/83. At this level ofproduction, India is the sixth largest producer of coal in the world - butproduction remains about 4 million tons per year less than demand.However, inadequate supplies of all forms of energy has been a majorconstraint hindering India's economic growth.

Petroleum

31. Petroleum reservoirs are found in sedimentary basins. In India,there are 27 sedimentary basins with a total area of approximately 1.7million sq. km, of which a'bout 1.4 million sq. km (81%) are onshore andthe remainder offshore (to a water depth of 200 meters). Commercialpetroleum production has been established in only three sedimentarybasins, viz., the Upper Assam Shelf in north-eastern India, the Cambaybasin in Gujarat, and the Bombay offshore basin which has severalpetroleum fields, namely, Bombay High, North Bassein (Panna), SouthBassein, Heera and Ratnagiri (Ratna). Many of India's potentialpetroleum-bearing areas remaini less than fully explored and production isconcentrated in only a few regions. Historically, the pace and scope ofexploration activity has been uneven and resources have been concentratedon a few promising areas. Since the discovery of the giant Bombay Highfield off the West Coast oE India in the mid-1970s, India has not made anew major commercial discovery. Ongoing exploration efforts of ONGC,however, have been encouraging and have identified several petroleum-bearing areas which need further exploratory drilling to determine theircommercial potential. Indications of petroleum have been found in eightother basins: Krishna-Godavari, Cauvery, Rajast-han, Bengal, AndamanIslands, Himalayan Foothills-Ganga Valley, Tripura Fold Belt, and theAssam-Arakan Fold Belt. Furthermore, four other basins are considered

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prospective on general geological grounds, although hydrocarbons have notyet been discovered. These basins are Saurashtra, Kutch, Konkan-Keralaand Mahanadi. The Krishna-Godavari and Cauvery basins indicate the mostpromising undeveloped potential to date.

32. Estimates of India's potential total recoverable hydrocarbonreserves are 4.5 billion tons of oil equivalent (toe), of which abouttwo-thirds are located offshore and of which about 75% is expected to bein the form of natural gas. Proven and probable recoverable hydrocarbonreserves are currently estimated at about 800 million toe of which about470 million tons is oil and the remainder (about 330 million toe) isnatural gas. Natural gas is becoming increasingly important to the Indianeconomy with the development of the Bombay High oilfield with itsassociated gas flows and planned development of the large offshore SouthBassein gas field. Gas consumption in 1982/83, is estimated at 1.5 mil-lion toe, and is forecast to rise to about 6.8 million toe by 1989/90.

33. Crude oil production from domestic reserves has increased steadilyover the past 20 years from 0.45 million tons in 1960/61 to almost 7million tons in 1970/71 and an estimated 26 million tons in 1983/84.Consumption of crude oil grew at about 6.5% per annum over the past fiveyears, and will reach an estimated 40 million tons in 1983/84. Importedcrude oil is expected to account for 14 million tons, or about 35% ofconsumption this year. The import bill for crude oil and petroleumproducts this year is estimated to be over US$4.6 billion, representing32% of total merchandise imports and 58% of India's merchandise exportearnings. By the end of the Sixth Plan period (1984/85), consumption -sexpected to reach about 44 million tons per year. This would exceedexpected domestic production by about 14 million tons on the basis ofexpected production from known petroleum reserves.

34. While there are good prospects for increasing production fromexisting fields, both onshore (the subject of this project) and offshore,India's dependence on crude imports could increase from a low of 33% ofits crude oil requirements in 1984/85 to about 50% in the early 1990'sunless there are major new discoveries developed in the next few years.Thus a concerted effort to accelerate exploration and improve theefficiency of existing production facilities is of vital importance and isa central objective of Government policy. To this end, the investmentprograms of ONGC and Oil India Limited (OIL), the Government-ownedinstitutions engaged in exploration and development of hydrocarbonresources, have been stepped up. The Sixth Five-Year Plan(1980/81-1984/85) originally allocated about US$3.7 billion 1/ forpetroleum exploration and development, which itself represented anincrease of almost 50% in real terms over the previous Plan. Revisedallocations for the Plan period are now about US$6 billion 1/, a furtherincrease of more than 60%.

1/ In 1980/81 prices.

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Petroleum Pricing

35. India is fully aware of the need to conserve energy and, to thisend, the Government has consistently set petroleum prices at levelsdesigned to ensure efficient energy use. Domestic petroleum product andcrude oil prices are regulated by the Government. The crude oil pricepaid by the Government to ONGC and OIL (in effect - a transfer price) wasraiSed in July 1981 from US$6.10 per barrel (Bbl) to US$17.30/Bbl andensures satisfactory profits for the companies. In 1982/83, ONGC's profitper barrel of oil, at US$4, was in line with the average for internationaloil companies. The profits, which are expected to increase to US$5/Bbl by1984/85, provide adequate cash flow to enable 0NGC and OIL to finance amajor portion of their investment programs from internally-generated fundsand compete equitably in the commercial markets with other foreign oilcompanies for borrowed funds. All exploration and development decisionsare based on international prices, and hence the lower crude oil transferprice does not act as a disincentive to exploration and development.Under the production-sharing contracts, foreign oil companies receive thefull. international price of their share of production. Retail productprices have been maintained, on average, at or above international levels.For example, gasoline, which retails for about US$1.12 in the USA, retailsfor US$2.31 per gallon in India. At the present time, therefore, both thelevel and the structure of petroleum prices in India is satisfactory andis the subject of regular review under the termns of the Second Bombay HighProject approved by the Board in December 1980.

36, Natural gas is currently sold directly by the producers (ONGC andOIL) to the consumer on the basis of long-term contracts that requireGovernment approval. The Government and ONGC follow the principle, to theextent possible, that gas is priced competitively in terms of the energy-equivalent price relative to the alternative fuel for which it issubstituting. On this basis, associated offshore gas, which accounts for55% of all gas sales, is priced between US$1.49 and US$7.44 per thousandcubic feet; the lower price applies to interruptible supplies to powerplants otherwise using coal or high sulfur heavy fuel oil and the higherprices apply to guaranteed supplies to industry and fertilizer plants.The average price for offshor,e free gas is about US$3.83 per thousandcubic feet, which is well above its production and delivery costs and, inenergy terms, is in line with the international price of fuel oil.Onshore gas from Gujarat, which accounts for 20% of present gas sales, ispriced at an average of only US$0.95 per thousand cubic feet due to thelow prices stipulated in old long-term contracts. ONGC intends toincrease the price as these contracts expire or are renegotiated. Foronshore gas from Assam, which accounts for about 25% of gas sales atpresent, the average price is about US$0.43 per thousand cubic feet,reflecting the surplus associated gas which is being flared due to thesmall size of the market in that isolated region. The structure of gasprices and their expected trend in the near future is currently satisfac-tory but is the subject of regular review under the terms of the SouthBassein Gas Development Project approved by the Board in February 1983.

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Sub-sector Institutions

37. Within the Government, the Ministry of Petroleum, is charged withpolicy-making in the petroleum sector. Together with the Ministry ofFinance and the Planning Commission, it approves all investments and thebudgets of public companies operating in the sector. ONGC and OIL, bothpublic sector undertakings, are engaged in the exploration for, anddevelopment of, hydrocarbon resources. Another public entity, the IndianOil Corporation, handles India's crude oil imports. The Oil IndustryDevelopment Board (OIDB) is a financial institution which obtains fundsthrough a cess levied on domestic crude production and provides somefinancing for public sector enterprises engaged in petroleum exploration,production and refining.

Petroleum Exploration and Development Policies and Investment Strategy

38. To develop and efficiently utilize its petroleum resources, theGovernment's investment program aims to: (i) accelerate explorationprograms by both foreign and national oil companies; (ii) increase produc-tion from existing oil and gas fields, primarily by accelerating thedevelopment programs of ONGC and OIL in areas where petroleum has alreadybeen discovered; and (iii) develop the gas pipeline system and encouragegas-based industries (e.g. fertilizer and petrochemical plants) to util-ize the substantial untapped gas resources.

39. In order to accelerate exploration activity and to encourageforeign oil company participation, thirty-two blocks, each ranging in sizefrom 10,000 to 30,000 sq. km offshore and onshore, were offered to inter-national bidders in late 1980. The total area offered, almost900,000 sq. km, represented about 50% of the country's sedimentary basinarea. One production-sharing agreement was signed with a consortium ledby Chevron (USA) for a 18,500 sq. km block in the Saurashtra basin off-shore Gujarat, north of the Bombay High field. The terms of the produc-tion sharing agreement provide for Chevron to drill at least three wells,spending a minimum of US$29 million over a thee-year period, at its ownrisk. Upon commercial discovery, ONGC may assume up to 50% joint venturein future development (without payment of exploration costs), and produc-tion will be split according to a scale which escalates with fieldprofitability. Until India achieves self-sufficiency in oil, GOI has theoption to purchase Chevron's share of the oil produced at internationalprices.

40. Invitations to bid on a second round of offerings were issued inAugust 1982. The second offering included about 50 blocks both onshoreand offshore and included new areas west of the Bombay High field and theouter shelves of the Krishna-Godavari and Mahanadi deltas. Unfortunately,this second offering coincided with the world-wide decline in explorationinvestment by international oil companies, (IOC's) and a perception bythem that the Indian sub-continent is not as attractive a proposition asother areas at this time. The net result was that, of 37 companiesinvited to bid, only a few responded. Discussions, however, are continu-ing with two of these bidders. With no upsurge expected soon, India'saccelerated investment program, in the near term, will depend largely on

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ONGC's and OIL's ability to undertake and successfully manage large andcomplex investment programs. Nevertheless the initial steps in opening upprospective acreage to private oil companies have been taken and GOI hasconfirmed its continuing coimmitment to its "open door" policy. Renewedinterest by the IOC's could result from a major discovery by ONGC orChevron in or adjacent to the areas offered. The Government is alsoconsidering several ideas to attract private initiatives for exploration.One such idea is for ONGC's subsidiary, Hydrocarbons India Limited, toform joint-ventures with both foreign and local private companies toundertake exploration projects.

41. To increase production from existing fields, GOI extensivelyreviewed its exploration, production and utilization strategies for theCambay Basin (and other areas) with the Bank and expressed its interest inundertaking some pilot enhanced oil recovery schemes for the heavy oilfields in the northern section of the Cambay ]3asin. Subsequently, thedialogue between ONGC and Bank staff expanded to include the full evalua-tion of the petroleum producing potential of this mature, mostly onshore,basin, as well as the operational and technological priorities to rapidlyincrease production, modernize the operations, and develop a program ofoptimal oil and gas recovery in the basin. GO)I is also rapidly expandingthe production of fertilizers and petrochemicals based on the expectednatural gas availability from the South Bassein and other fields and iscurrently examining a gas distribution pipeline of some 1700 km length toensure optimum utilization of the gas.

The Bank's Role and Lending Strategy in the Petroleum Subsector

42. The Bank's objective for participating in the energy sector inIndia is that any involvement should be aimed at increasing the efficiencywith which scarce resources are utilized; decreasing India's dependence onimports; and enabling the transfer of appropriate technology while, simul-taneously building up local expertise through training and other formsof foreign-local collaboration. Most of the Bank's lending operations toIndia in the sector have been in the power subsector--31 Bank/IDAoperations, totalling US$3.7 billion spanning a 34-year period. TheBank's involvement in the petroleum subsector however has grown substan-tially within the last six years. Four loans have been made to ONGC,including two for the development of the Bombay High Field 1/ (US$550million in all); one for exploration in the Krishna-Godavari basin(US$165.5 million)2/, and another for offshore gas development in SouthBassein (US$222.3 million)3/. A loan (US$200 million) has also been madefor the modernization of several refineries.4/

1/ Loan No. 1473-IN, approved in June 1977; and Loan No. 1925-IN, approvedin December 1980.

2/ Loan No. 2205-IN, approvied in October 1982.3/ Loan No. 2141-IN, approved in February 1983.4/ Loan No. 2123-IN, approved in April 1982.

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43. Each project was designed to address a specific set of issues inthe subsector. (i) Planning: the first Bombay High Project aimed atestablishing the basis for a sound long-term development program forBombay High, the most important oil field in India, initiating the earlydevelopment phases in an optimal manner, and establishing ONGC as astrong, well-managed company that could be attractive to the commercialfinancial markets. (ii) Institutional Development: the Second BombayHigh Project was aimed at providing ONGC with appropriate managerialcapabilities while accelerating the development of the Bombay High fieldat the time of rapid increase in oil prices. A Project Performance AuditReport (No. 4139, October 11, 1982) was issued to the Executive Directorsthat favorably reviewed the first project--and made recommendations forstrengthening ONGC and its modus operandi--recommendations that wereincorporated in the later projects.l/ The second loan has also proceededsatisfactorily--with production of crude oil and gas substantially exceed-ing that forecast at appraisal. Disbursements will be completed by mid-1984--about 9 months behind schedule due to some modifications in theproject scope and delays in equipment delivery for the onshore and supportfacilities. (iii) Technology Transfer and Gas Utilization Strategy: theSouth Bassein Gas Project introduced ONGC to the complex technologicalproblems of offshore gas production and set the initial conditions for thecreation and development of India's gas infrastructure and marketingissues. During the preparation of the project the Bank discussed withGOI, ONGC and its consultants, the scope of market studies to be carriedout and has been instrumental in demonstrating the benefits of a widerutilization of gas. As a result, the main components of that project havebeen optimized in terms of the anticipated market. This dialogue iscontinuing during project supervision as GOI formulates a long-term gasstrategy designed to accelerate the development of free and associated gasreserves, based not only on the use of gas as feedstock in the fertilizerindustry, but also on the use of gas as boiler and household fuel if thisproves economic. (iv) Encouraging use of foreign oil companies: theKrishna-Godavari Exploration Project provided a framework within whichONGC's exploration strategies as well as the GOI's policies with respectto the balance between national and private resources could be addressed.While not formally associated with the process, the Bank has beeninstrumental in increasing the attractiveness of the offering of theexploration areas to IOC's (the seven proposals received in the 1980offering were for two blocks added at the suggestion of the Bank).Through this project, the first major basin exploration project undertakenby ONGC, the Bank has, to a considerable extent, assisted in minimizingthe risks of the Krishna-Godavari exploration among the onshore, shallowoffshore and deep offshore portions of the project area.

1/ The one suggestion that was not implemented (that ONGC, rather thanGOI, be the "borrower" of Bank funds directly) was discussed in detailwith GOI but runs counter to Government policy with respect to allforeign borrowings from official sources--and has not proved detrimen-tal to ONGC's financial reputation.

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PART IV - THE PROJECT

Obiectives and rationale for Bank Involvement

44. The project represents ONGC's first major effort at increasingproduction from an existing field and, as mentioned in para. 41 above,hais requested Bank assistance in reviewing its exploration, productionand utilization strategies fior the field. During the course of thisreview, the design and scope of the project haLs changed significantly:the initial development of the heavy oil fields, the seismic surveycomponents, the very substantial training component and the extensive useof foreign expertise in the technologically-critical phases of the projectall resuLt from the Bank's involvement with ONGC in developing theproject. Continued involvement throughout project execution will ensurethat optimal decisions are taken at each stage of the projectimplement:ation.

45, The proposed project was appraised in September 1983. The StaffAppraisal Report (No.4928-IN) dated March 8, 1984 is being distributedsepa:rately to the Executive Directors. A Supplementary Data Sheet appearsas Annex III. Negotiations were held in Washington, DC in March 1984.The 3orrcwer, and ONGC were represented in a team coordinated byMr. Chatterjee of the Department of Economic Affairs within the Ministryof Finance.

.TheCapa =E Basin

46. The Cambay basin (see Map 17603) is a 400 km long by 80 km widesedimentary basin lying roughly north-south in the State of Gujarat. Aportion (about 20%) of the basin is located in near-shore tidal and shal-low water areas of the Gulf of Cambay. Production from the basin com-menced in 1960 and cumulative production through 1983 was about 34 milliontoe, 90% of which was oil, the remainder, gas. Current productionaverages 3.2 million tons of oil and 0.6 million toe of gas per year.Akbout half of the production comes from one field--the Ankleshvar field--which has now passed its peak productive years and is showing a 25% dropin annual output. Much of the remaining oil to be recovered is "heavy"oil of about 18 degree API gravity and a viscosity range of 100 to 500cent:..poise,l/ located in the northern part of the basin--in the Santhal,Balol and Lanwa fields. More than 25 other fields--mostly small andisolated--have been identified but not evaluated using modern techniques.Some portions of the basin have not yet been surveyed or drilled.

47. The project would coimprise the following components:

(a) Exploration: (i) seismic survey, using modern technology,of tne shallow water, tidal flats and shoal areas of the Cambay Gulf.About 1750 line-kilometers of data would be acquired; and (ii) deep

1/ Oil with an API gravity range of 20 or less, and a viscosity of 100centipoise or more, is considered "heavy oil".

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exploratory drilling of 4 wells to extend the knowledge of the subsurfacefrom the currenit 3000 meters to 5000 meters depth in highly prospectiveareas.

(b) Development and Production: (i) complete the developmentschemes of several light oil fields namely: Kalol, North and South Kadi,Sobhasan and Nawagam involving 247 new wells producing an incremental 0.8million tons of oil; (ii) commence the development of three known heavyoil fields namely: North Santhal, Balol and Lanwa involving about 287wells producing an incremental 0.75 million tons of oil;(iii) rehabilitate the existing Cambay gas field involving 14 wells toreverse the decline in current production rates; and (iv) institute majorimprovements to the well maintenance (workover) operations to eliminatethe backlog of 345 existing wells needing repair and to upgrade the main-tenance standards thereby increasing the oil production by about 0.3 to0.4 million tons per year. The backlog will be eliminated over a 5-yearperiod by replacing obsolete workover rigs, purchasing new rigs and con-tracting part of the work to outside groups.

(c) Enhanced Oil Recovery (EOR) Pilot Schemes: Three pilotschemes are proposed: two thermal EOR (in-situ combustion) pilots in theLanwa heavy oil field and a polymer chemical flood pilot in the Jhaloralight oil field. The pilot operations are expected to last about fouryears and are timed to produce solutions to remedy the progressive declinein field production expected to become acute towards the end of thedecade. An expected result of the EOR pilot test is a substantialincrease in the volume of heavy oil produced from the Cambay Basin.Advanced planning for the utilization of this additional oil is essentialand GOI would undertake, by March 31, 1985, a heavy oil utilization study,discuss the findings with the Bank and take the necessary steps to ensurethe utilization, or sale, of the heavy oil (Section 4.03, Loan Agreement).

(d) Technical Assistance and Training: ONGC, with foreignassistance, would institute an extensive field-level staff trainingprogram that is optimally sized to the project's needs and covers allfacets of oil-field operations--drilling, production, cementing, logging,pipelines, instrumentation and well stimulation techniques. Expatriateassistance would also be provided for the introduction of the new tech-nologies required in the application and evaluation of EOR methods, and asrequired, also in mud and reservoir engineering, workover techniques andformation testing. Experienced international contractors in drilling andwell services would be used where local capabilities are not adequate orconversant with the technologies to be employed.

Project Costs and Financing

48. The financing requirements of the project, includingcontingencies, price escalation and front-end fee, are estimated atUS$954.3 million of which US$545.8 million represents the foreign exchangecosts. Taxes and duties included in the above costs are estimated atUS$150.0 million. Contingencies were determined on the basis of thefollowing assumptions and projections:

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(i) Physical contingencies:

EOR and Exploration - 20%Drilling expenditures - 15%Equipment and TechnicalAssistance/Training - 10%

(ii) Price contingencies,:

FY84/85 FY85186 FY86/87 F§LY8788

Foreign costs 7.5% 7.0% 6.0% 6.0%Local costs 7.0% 8.0% 8.0% 6.0%

49. The amount of the proposed Bank loan (US$242.5 million), wasdetermined after considering firstly, the types of components suitable forBank financing: (i) those items which are generaly not financed bysuppliers' credits (contractor and consultant services) or by other com-mercial sources (pilot EOR schemes and exploration); (ii) items that aremost suitable for international competitive bi.dding and involve minimumretroactive financing; and (iii) items whose technological and qualityaspects are critical to t:he success of the project and in which continiuedBank involvement throughout the life of the project is important. Second,thie share of Bank financing of the selected project components reflectsthie Bank's judgement as to the appropriate level of participation requiredin the component to be reascnably assured that, its objectives under theproject will be met and a. recognition that, over time, the Bank's level ofparticipation in such projects should progressively decrease. Theapplication of these two criteria has resulted in a loan that finances 25%of total project costs.

50. The Bank loan, which. represents about 1% of ONGC's overall invest-ment program in the next 6 years, would be made to GOI on standard IBR])terms--20 years, including 5 years' grace period, at the standard variablerate. GOI would on-lend the proceeds of the loan to ONGC at aninterest rate of 12% for a maximum of 15 years including 5 years' grace.This onlending rate is expected to exceed the domestic inflation ratesoutlined above during the next 5 years. The 5 year grace period is jus-tified on the grounds that about 14% of the project representsexploration, EOR pilot schemes and training which yield only long-termbenefits; that large additional investments for exploratory drillingand/or commercial scale EOR applications will follow the proposed project;that half of the project loan financing is from commercial sources (withrelatively short repayment terms of 6-8 years); and that ONGC will need toborrow large amounts (US$7 billion) over the next 6 years, mostly commer-cial loans, which need to be balanced by longer term borrowing in order tomaintain a reasonable debt service burden. Execution of a Subsidiary LoanAgreement between GOI and ONGC on terms and conditions satisfactory to theBank would be a condition of effectiveness of the proposed loan(Section 6.01, Loan Agreement).

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ONGC's Investment Plan and its Funding - Cofinancing

51. ONGC's Investment Plan over the next six years, 1984/85 through1989/90, as approved by GOI, is as follows:

US$ (billion) (%)

ExplorationOffshore 3.1 16Onshore 4.1 21

DevelopmentOffshore 7.3 37Onshore 4.6 24

Other items 0.3 2

Total 19.4 100

This Investment Plan assumes that increased exploration will lead todiscoveries that will increase the annual oil production rate above the31 million tons in 1989/90 that is expected from currently known resourcesto a level of 45 million tons of oil per year by the end of the decade.

52. The financing of this ambitious investment program will be a majortask facing ONGC throughout the period. In the absence of newdiscoveries, ONGC's reserves/production ratio will decline from thepresent 23 years to about 12 years by 1989/90. Production will peaktowards the end of the decade and decline thereafter unless new commercialdiscoveries are made and brought on stream within the next 5 to 10 years.This scenario emphasizes the prudence of both an ambitious explorationprogram (representing 37% of total investments through 1989/90), and aconservative borrowing program until its petroleum reserve base is furtherexpanded.

ONGC proposes to finance this investment program as follows:

US$ (billion) (%)

Planned Investments 19.4 100(Of which foreignexchange costs) (8.7) (45)

Financed by:Internal cash generation 12.2 63Foreign commercialborrowings 4.4 23World Bank loans 1/ 0.6 3Other loans 2.2 11

19.4 100

1/ Disbursements under this loan as well as under the already approvedKrishna-Godavari and South Bassein loans.

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53. Such a borrowing program is considered prudent and ONGC's overallprojected financial situation during the 6-year period is consideredsatisfactory. ONGC's debt/equity ratio, at present, is about 40/60 andONGC has confirmed its intention to maintain a current ratio of at least1.3, a debt/equity ratio of 1.5 or less and a debt service coverage ratioof at least 1.5. As in past loans, in this sector, GOI would, from timeto time, carry out a review of the prices of crude oil and natural gas andset such prices at a level to enable ONGC, under conditions of efficientoperation, to meet its operating expenses and earn a satisfactory after-tax return on assets employed, to meet its debt service and working capi-tal requirements and finance a substantial portion of its proposed capitalinvestments (Section 4.02, Loan Agreement). Additionally, ONGC would(i) submit, annually to GOI, an analysis of its financial situation as abasis for setting the prices of oil and natural gas. Such analysis wouldinclude, inter alia, a financial evaluation of the Project and other majordevelopment investments and would indicate the level of prices requiredfor ONGC to earn a discounted cash flow return of 15% after tax on theproject or other major investments (Section 4.03, Project Agreement); and(ii) follow normally accepted, prudent financial practices and maintainsatisfactory debt-equity, current, and debt service ratios (Section 4.04,Project Agreement).

54. ONGC would finance 49% (US$467 million) of the project from itsinternal cash flow resources and would seek commercial cofinancing ofUS$245 million, representing 26% of the total project cost for theproject. The Bank has successfully encouraged ONGC to diversify itssources of foreign exchange financing. Initially, cofinancing was con-fined to export, supplier, or buyer credit financing but, in recent years,commercial borrowing has figured increasingly as a source of borrowing.Commercial co-financing has increased from nothing in 1976/77 to anestimated 50% of total ONGC loans in 1983/84. Specifically, over the next24 months ONGC expects to borrow about US$900 million in the commercialmarkets for its total investment program, including this project.

Procurement and Disbursement

55. Annex IV, attached, details the manner in which the project com-ponents will be procured. For manufactured goods to be financed by theBank, domestic manufacturers would be allowed a margin of preference equalto 15% of the CIF bid price of imported goods or the actual customs dutiesand import taxes, whichever is less, for bid evaluation purposes.Domestic contractors for drilling and cementation works would be allowed amargin of preference of 7 1/2%, in accordance with the Bank's standardguidelines. Limited International Bidding (LIB) procedures, estimated tototal about US$6 million, would be used in respect of items from a limitednumber of qualified suppliers or items whose delivery periods arecritical, or for bid packages for equipment and materials costing lessthan US$300,000. Under LIB procedures, quotations from at least foursuppliers from three different countries would be solicited. ONGC ForceAccount expenditures and direct local purchases would be procured by ONGC

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from single or limited suppliers as necessary for timely completion of theproject.

56. All service and equipment contracts over US$1 million (about 15 innumber) would be subject to prior Bank review and such review would cover95% of the value of the service contracts and about 80% of the value ofequipment and materials to be financed by the Bank. Other contracts wouldbe subject to selective post-award review. Retroactive financing in anamount not exceeding US$2 million for expenditures incurred afterSeptember 1, 1983 is proposed to cover costs for consultancy, seismicsurveys and equipment purchases (Paragraph 3, Schedule 1, Loan Agreement).The Project is expected to be completed by March 31, 1990 and the closingdate would be September 30, 1990.

Project Implementation

57. ONGC is managed by a Commission consisting of a Chairman, sixfull-time Members (Finance, Materials, Personnel, Exploration, Offshoreand Onshore) and two part-time members representing GOI's Ministries o'Finance and Energy, respectively. ONGC's main administrative and finan-cial functions (planning, procurement and stores, accounting, personnel,computer activities, etc.) are centralized in the corporate headquartersat Dehra Dun in Uttar Pradesh, along with the main research and develop-ment and training facilities. Operational staff are divided among threeregional offices (Central, Western and Eastern) and the Bombay OffshoreProject (BOP). Operational responsibility and the authority to commitfunds within their approved budgets have been delegated to RegionalManagers. ONGC would be responsible for implementing the project and theCambay Basin project would be supervised by the Western Region which isresponsible for all onshore operations of ONGC in Gujarat, Rajasthan,Uttar Pradesh and the northern States.

58. Given the importance of the project, however, ONGC has establisheda separate Project Implementation Unit (PIU) within the Western Regionoffice to take day-to-day responsibility for implementing the project.ONGC would provide the Bank with periodic project progress reports, to anagreed format, as well as semi-annual unaudited financial reports duringproject implementation within 45 days after the end of the reportingperiod. ONGC would prepare a Project Completion Report within six monthsof project completion or after completion of disbursements. ONGC'saudited accounts would be provided to the Bank not later than 12 monthsafter the end of the fiscal year (Sections 2.05 and 4.02, ProjectAgreement).

Benefits and Risks

59. The economic benefits of the proposed project are taken to be thesavings of imports of crude oil and fuel oil resulting from the incremen-tal production of crude oil and natural gas respectively. On the (basecase) assumption that the real economic price of crude oil and natural gas

-22-

will remain constant during the life of the project 1/ the economic rateof return (ERR) for the project is 91%. This high ERR is to be expectedwhere the investment is in an already mature field with substantial sunkcosts. The ERR of the primary development of the heavy oil fields and thegas fields, where there are few sunk costs, is still an acceptable 53% and46%, respectively. An analysis of the sensitivity of the project toalternative pessimistic assumptions indicated that, if investment costsincrease by 20%, or revenues drop by 20%, the project ERR changes to 70%and 66%, respectively. In a "worst case" scenario whereby, in addition tothe above, construction is delayed by a year, the ERR drops to a stillacceptable 34%. On an after-tax basis, the project's composite financialrate of return is an acceptable 18% with a pay-back period of 8 years--including the 5 year construction period.

60. The principal project risks are those normally associated withpetroleum exploration and development, viz., geological and technologicalrisks. The geological risks include the possibility that. the seismicsurvey will indicate only a few or small drillable prospects; the explora-tion wells will indicate a Low potential for commercial quantities ofpetroleum in the deep horizons; and/or the petroleum recovery factor fromproducing fields may be less than anticipated, The technological risksinclude the possibility that: the seismic survey techniques and opera-tions may prove ineffective in the difficult environment of the CambayGulf; that the drilling of the deep exploration wells may fail due to highpressures and temperatures; and that the enhanced recovery methods mayonly provide a marginal incremental recovery or prove to be too expensiveand therefore uneconomic, These geological and technological risks havebeen minimized through the use of experienced seismic and drilling con-tractors as well as consultants; and by making conservative assumptionsabout the incremental petroleum recovery in the economic analysis. Therisks are acceptable.

Ecology and Safety

61. The proposed project is expected to cause few environmentalproblems upon completion. During the implementation phase, there isalways some risk of surface blow-outs and the possibility of fire. Theuse of sophisticated, industry-standard blow-out preventors and gasmonitoring equipment would keep these risks at industry standards--whichare acceptable. The chemicals used, and the by-products of implementingEOR schemes are not judged to be a safety or environmental hazard, again,so long as appropriate precautions are taken at every step of theprojects. To this end, ONGC would take all precautions, in line withcurrent industry practice, to protect workers and the environment bothduring project implementation and subsequent operation. ONGC's insurancepratctices were examined and found to be satisfactory (Section 2.08,Project Agreement).

1/ Benchmark 1983 prices are: light crude oil US$29/Bbl, heavy crudeoil US$26/Bbl and natural gas US$4.50/OOOSCF.

-23-

PART V - LEGAL INSTRUMENTS AND AUTHORITY

62. The draft Loan Agreement between India and the Bank, the draftProject Agreement between the Bank and ONGC and the Report of theCommittee provided for in Article III, Section 4(iii), of the Articles ofAgreement of the Bank are being distributed to the Executive Directorsseparately.

63. Special conditions of the project are listed in Section III ofAnnex III. Execution of the Subsidiary Loan Agreement between India andONGC would be made a condition of loan effectiveness (Section 6.01, LoanAgreement).

64. I am satisfied that the proposed loan would comply with theArticles of Agreement of the Bank.

PART VI - RECOMMENDATION

65. I recommended that the Executive Directors approve the proposedloan.

A.W. ClausenPresident

March 9, 1984

ANNEX IPage 1 of 5

INDIA - SOCIAL INDICATORS DATA SHEETINDIA REFERENCE GROUPS (WEIGHTED AVERAGES) La

MOST (NDST RECENT ESTIMATE) /bRECENT LOW INCOME MIDDLE INCOKE

1960- 1970' ESTIMATE- ASIA & PACIFIC ASIA & PACIFICAREA (TWtAND SQ. IH)

TOTAL 3287.6 3287.6 3287.6AGRICULTURAL 1760.7 1780.5 1811.3

GNP PIR CAPITA (US$) 70.0 100.0 260.0 276.7 1028.6

ENERGY COSPrION PER CAPITA(KILOGRAMS OF COAL FQUIVALENT) 114.0 165.0 210.0 398.4 792.8

POPULATION AND VITAL STATISTICSPOPULATION,MID-YEAR (THOUSANDS) 434850.0 547569.0 690183.0URBAN POPULATION (Z OF TOTAL) 18.0 19.8 23.7 21.5 32.9

POPULATION PROJECTIONSPOPULATION IN YEAR 2000 (MILL) 1001.3STATIONARY POPULATION (MILL) 1838.3YEAR STATIONARY POP. REACHED 2140

POPULATION DENSITYr PER SQ. KM. 132.3 166.6 205.3 161.7 260.7

PER SQ. KM. AGRI. LAND 247.0 307.5 372.7 363.1 1696.5

POPULATION AGE STRUCTURE (X)0-14 YRS 40.9 42.7 39.7 36.6 39.4

15-64 YRS 54.5 54.2 57.2 59.2 57.265 AND ABOVE 4.6 3.1 3.0 4.2 3.3

POPULATION GROWTH RATE (Z)TOTAL 1.8 2.3 2.1 1.9 2.3URBAN 2.5 3.3 3.7 4.0 3.9

CRUDE BIRTH RATE (PER THOUS) 43.7 40.0 35.4 29.3 31.3CRUDE DEATH RATE (PER THOUS) 21.8 16.7 13.3 10.9 9.6GROSS REPRODUCTION RATE 2.9 2,7 2.4 2.0 2.0

FAMILY PLANNINGACCEPTORS, ANNUAL (THOUS) 64.0 3782.0 6826.0USERS (X OF MARRIED WOMEN) .. 12.0 23.0 48.1 46.6

FOOD AM) NUTRIrIONINDEX OF FOOD PROD. PER CAPITA(1969-71-100) 98.0 102.0 107.0 111.4 125.2

PER CAPITA SUPPLY OFCALORIES (X OF REQUIREMENTS) 96.0 90.0 87.0 98.1 114.2PROTEINS (GRAMS PER DAY) 54.0 50.0 47.0 56.7 57.9OF WHICH ANIMAL AND PULSE 17.0 15.0 13.0/c 13.9 14.1

CHILD (AGES 1-4) DEATH RATE 26.2 20.7 17.0 12.2 7.6

bEALTELIFE EXPECT. AT BIRTH (YEARS) 43.2 48.1 52.2 59.6 60.2INFANT MORT. RATE (PER THOUS) 165.0 139.0 121.2 96.6 68.1

ACCESS TO SAFE WATER (ZPOP)TOTAL .. 17.0 33.0/d 32.9 37.1URBAN . .. 60.0 83.071 70.8 54.8RURAL .. 6.0 20.071 22.2 26.4

ACCESS TO EXCRETA DISPOSAL(X OF POPULATION)TOTAL .. 18.0 20.0/e 18.1 41.4URBAN .. 85.0 87.07e 72.7 47.5RURAL 1.0 2.07. 4.7 33.4

POPULATION PER PHYSICIAN 4850.0 4890.0 3640.0/f 3506.0 7771.9POP. PER NURSING PERSON 10980.OI/ 8300.0 5380.077 4797.9 2462.6POP. PER HOSPITAL BED

TOTAL 2180.0 1650.0 1310.0/d 1100.6 1047.2URBAN .. .. 370.07d 298.4 651.1RURAL .. .. 10410.07d 5941.6 2591.9

ADMISSIONS PER HOSPITAL BED .. .. .. .. 27.0

HOUSINGAVERAGE SIZE OF HOUSEHOLD

TOTAL 5.2 5.6 5.2/eURBAN 5.2 5.6 4.87..RURAL 5.2 5.6 5.37T

AVERAGE No. OF PERSONS/ROOMTOTAL 2.6 2.8URBAN 2.6 2.8RURAL 2.6 2.8

ACCESS TO ELECT. (% OF DWELLINGS)TOTAL ..

URBAN ..

RURAL ..- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - --_ _ _ _._ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ - -_ _ _- _ _ _ - _- _ _- _ _ _- _ _- _- _- _ _- _- _- - _- _ _- _ _- _ _- _ - -_ - -_ - -_ -_ _ _ - -_ -

ANNEX IPage 2 of 5

INDLA - SOCIAL. INDICATORS DATA SHEETINDIA REFERENCE GROUPS (WEIGHTED AVERAGES) /a

MOST (MOST RECENT ESTDIATE) /bb RECENT LOW INCOME MIDDLE INCOME

1960- 1970 ESTIMATEh- ASIA l PACIFIC ASIA & PACIFIC

EDUCATIONADJUSTED ENROLLMENT RATIOS

PRIMARY: TOTAL 61.0 73.0 76.0/f 96.1 101.2MALE 80.0 90.0 90.07? 107.8 106.0FEMALE 40.0 56.0 61.07f 82.9 97.5

SECONDARY: TOTAL 20.0 26.0 28.0/f 30.2 44.9MALE 30.0 36.0 37.07o 37.3 50.0FEMALE 10.0 15.0 18.0/f 22.2 44.6

VOCATIONAL (% OF SECONDARY) 2.8 1.0 0.7

/e 2.3 18.5

PUPIL-TEACHER RATIOPRLMARY 46.0 41.0 43.0/f 34.4 32.7SECONDARY 16.0 21.0 18.4 23.4

ADULT LITERACY RATE (%) 27.8 33.4 36.0 53.5 72.9

CONSUMPTIONPASSENGER CARS/THOUSAND POP 0.6 1.1 1.3/f 1.6 9.;7RADIO RECEIVERS/THOUSAND POP 4_9 21.5 44.4 96.8 113.7TV RECEIVERS/THOUSAND POP 0.0 0.0 1.7 9.9 50.1NEWSPAPER ( "DAILY GENERAL

INTEREST") CIRCULATIONPER THOUSAND POPULATION 10.6 16.2 19.7 16.4 54.0

CINEMA ANNUAL ATTENDANCE/CAPITA 3.2 4.1 3.7/_ 3.6 3.4

LABOR FORCETOTAL LABOR FORCE (THOUS) 185951.0 219194.0 271179.0

FEMALE (PERCENT) 30.7 32.5 31.8 33.3 33.6AGRICULTURE (PERCENT) 74.0 74.0 69.3 69.0 50.9INDUSTRY (PERCENT) 11.0 11.0 13.2 15.8 19.2

PARTICIPATION RATE (PERCENT)TOTAL 42.8 40.0 39.3 42.5 38.6MALE 5;7.0 52.4 51.9 54.4 50.7FEMALE 2;7.3 26.9 25.9 29.8 26.6

ECONOMIC DEPENDENCY RATIO 1.1 1.1 1.1 1.0 1.1

INCOME DISTRIBUTIONPERCENT OF PRIVATE INCOMERECEIVED BY

HIGHEST 5% OF HOUSEHOLDS 26.7 26.3/h 22.2/e 16.5 22.2HIGHEST 207 OF HOUSEHOLDS 51.7 48.97? 49.477 43.5 48.0LOWEST 20% OF HOUSEHOLDS 4.1 6.77Th 7.07e 6.9 6.4LOWEST 40% OF HOUSEHOLDS 13.6 17.27h 16.27e 17.5 15.5

POVERTY TARCET GROUPSESTIMATED ABSOLUTE POVERTY INCOMELEVEL (US$ PER CAPITA)

URBAN .. .. 132.0 133.9 194.5RURAL .. .. 114.0 111.6 155.0

ESTIMATED RELATIVE POVERTY INCOMELEVEL (US$ PER CAPITA)

URBAN .. .. .. .. 178.0

RURAL .. .. .. .. 164.8

ESTIMATED POP. BELOW ABSOLUTEPOVERTY INCOME LEVEL (7)

URBAN .. .. 40.3 43.8 24.4

RURAL .. .. 50.7 51.7 41.1

NOT AVAILABLENOT APPLICABLE

N O T E S

_ /a The group averages for each indicator are population-weighted arithmetic means. Coverage of countries among theindicators depends on availability of data and is not uniform.

/b Unless otherwise noted, "Data for 1960' refer to any year between 1959 and 1961; "Data for 1970" between 1969 and1971; and data for "Most Recent Estimate" between 1979 and 1981.

/c 1977; Id 1976; Ie 1975; If 1978; /g 1962; /b 1964-65.

Nay 1983

ANNE IPage 3 of 5

DEFINITlOttS OF SOCIAL INDhICATORS

ItotesbAlthough the data are dt-e fr,neare enrly judged tha sost sthrtai _.drliabl,. it1 shoul aI heotd that thy ey ott be totroottooslycuepsoeble a. of the lok of statdrdieed7 deftotoasdcnet sdb diferet uoris-t clrlecin th dat. Tedts.xotee efltdeorb orders of asotude 1 td ict rns o ceettfd ettosjrdta cs eee onre

The M refeen. grfp e~.rd.( thedsercootr groop of the_ sobject cout yoodi 2fcstygru thseohthge teaeica ha h orygofo haffiitisl. n tb tefreoa grup ite he ssrees ae pooisixo eighed rixheti eso. fo eah ixlcetr ed.sdfo oly-heodajoity.f th coetria i

gTho hoel dets ha hnietr SInc tecerg of coj.t -crYs -es 2) th itdi .tu . depnd on1 tiheealbic ofdtadaotutrecstt st f the

e-oh.d.t 1990 date. pdirulatii-x oer Nursing Person d Poppatioddiidd ty uaMrio. rctcn

1915 eod 111 date -PPcol`9 1t pt oospitsiled 19tota .uhs.cd tl-Ppito ttl

-. P.. t'. I!~~~~~~~~~~~~~~~~rbn co url d -lndd h th dO tsoioo d ubyr ofb. h fptlbd

cslcuiaoed by psreconestt ethdds ur Iobutas(97-I hei);reurltalucetet. foppesltesetbuseet peex _ti .sate

1960. 1970, cod 19.1H 781 dtebrht opiis ncue Oc rlco/gnrs haltl.d sodp r..ra.:heslse oa or d ruralhsitesoteia odetrltct spSPiLlltt oll hTol.tyAfITiCh pocisuorthoapiala se incodedonly nder'ots,ToalPrueto. idSctltoeets a o ol I 96, 90byt 95 teisust Seie led - oabne- o dtein to or l -ffhega

date -true esptsl dolded hy the bluhe ut ibeds

19u0g uouotee 191 90 n1998 dnt borgeSloo dttehifd (toraooix rethouehid -i-- total urb.so u

total popuistlon hy ego sodsen and their surtolity 7co fetiit o9houehld Por delatca porpoa_e.

races. yrojcttotpsr Retere fost -tbttyrseacoetieeofultheeiaagtae o.ee teco-ioe.tht odue aefstclene1le eat-Iglf xottfc it ndest at onr' o-o peteons pe r rl- din sdlb urhen en rural occup-iedi ctoent dooit,csic Icie ecl at exlelie opcttc xtehiibitiog If 775deloi rxoool,helIogto od o-eetncsrco o

cobnaits of S.rait coz etlt ltxd io rjetu opst :,,., .1of dtotal, orhso co. rrl. oegIes..tory

Lino th b irth rso is y equa bto thetnthrate, a i le the. ag rfIrcCATItSO =.:

each generstioc of coec re lsce tif eaty heoottr Fnolno ofIL use tooctaylo a etoae frset

Tersa_i t uplto srahe h otoq stat t 1 1ionaryt ectcot uplsar peld _ortboctth oflilscolae

Pocoletloo heosoty .... Yrt'tccx-~.. ofh.. .rt. l_oeqtretlatfuyerofac tpteyltoto;Pet fen. bei" be -I C--oc oulttopreqteiooeoc(Ilhctre)o.ro .o geer d ucl tl,, ol ,otecrtaInigS ercin oPet en.be. osioulturl land- Coeptd tsaortt goutrl adgtrll tldt

otly;... Y91,190 o 111de toc...tl erolnet ("rcitho eudrl-lcolxlisioio

popultion 1961 197, so 1911taco. Pui-echrrP -I cr-1ro cd ercindsoTtisaenserildi

,,.henlo..ocif ctltoffot- I_tl- _c_alg _o _ ree toand riayntotayesltnddyuhooftahr ohc

yea pouleiotfor195-hI '91- 1, o '90Ill. repohogltte

peatippocto If ."Ll,jr 197h, tnt 1961 , daa hC Iti'O"' EToutIh

ppltion; 190r97,ed 1991 doTs, yd, care. ryto esta ih oet~ealdsahloe ets niroasterreuctio cat-Atecge nthot o daohtorsoocaoottl ear c nilOtoryto hi leehertorit eprdoclcepeiodOf he npeleneepreartge-pocticOslo eceoer lot toasutcoplaton)- fAlPtpi ofcroy tes fr 11t

ferIliy rtes uesl y foe-eartoeagr edIn in196, 171,otthrodcete o gnerl ublc pr teteut f ppulcio 1 ocldeeat100.lceatrctocalcoociand.ncsr-$,oheetdioorsiPesiyfatit-Acecoe Moua(totoos)scuatuheuiccptcxeeone oey_t otfo be-o lest faytot1 _h_p1alelcess

ofVjrV bit-oto eie te upie fntoa lypann coucrie- aholixh-d iloenllog. ..... l-t- - d1C"

p 19e.Ttcleals huotoouelt-ftolesttbudattdeiyPaot-er oreto xtidcxn ecnaeo aro gorlprI e huadppttln nldoutcne teooreoec o chld-ear N

0te15-ti .ert oh. use.. h-lcth-co horotooceot ontlrot- outao ol eclto ettesi fet

oIl eorledcntn teutcat crop. Ncspoctclrcclooocloothoeactpuolatlo)-hloetloutrag

yacl 0201' SOTt7ITIdN19gccu-at_o cf"alr rrulItco reppr,dfndYsaproia

based to60 nePoalyergtpodce-p-e x gttf116, 97,so 10

toyP. 197aieeupie uers toaeotc P'reduotioc, in ridls-ppy... fxlIage IrlflItln torto onre r oroo -e,an heng Itsot.Oe upie rcud nta fr,sed,dopaelt 90,171sddOI os

athoseol le;19-5,17an 1 911 date, - and electicity, eaerPend gy ot percen'i M -Idtage fIt tallhrfre 0

cuter prtein, o otolch 109cesto60 h ota t70f Tes 96,070 n 191-dot. dThodcurb hao-nb ' etlto o aeetotete reboo tat loe o 7 Irnsof otl rotinoct20groe eflcoog geseteououccofolepoulaIo, ed ongtie ten.

Ch 'i (eas'h A Ioth toc (pe t Iofet)- barth. teethe _. perthoae d t ereteofPrcttooohthochathud-tctntbrietSag gou 14 eax,00chldeninthsag ooo; or000 ooo1t98rct d.-P ... choent ( orrc, ouoo 20 er bl ,so p-orsa -l proot o

coatotie datateclor footlIfdtolox 196,1110 nd 981 atedlosohlte

obit;1960, 1970. ott 1981 duo. dodh tepcoteo uoteo ahio

ldot ct(lyOto (prthuct)-anoC..a. o ooosute o isolxoe thoolut Ponrt ooe ....(t prtoIa - or atan .irua-yer9 fso8 prthusn lice little 1990, , 197 ott 0 1 9170t, -heotR. poet ncx eoll ht noclor eoseiha uha

ocos 0

tftOte Ie relofPoultlo -toxl ubn,so cro ocrttno l deuao ie lu eoottlto-tuttoureenehs oOushr o popl (tta,uro, t creP_ihasoohtcceou_f ffrooeIfabiortoppl dlcua cao ufc xeto nroe u lao Os-tlogPo.. o Toos len f (tl percoita e-lobsoad. rtuccooteelnotod noorotuclaotxttron prctactttboreboios iarlng pt ... rulreocoxuntyY.usht Yu ot -tlirdo ocraxp. rcbl t

oooiarytoll) 0 perenccee f teirtrptosppato.Itopoonlcctofhecory ItbetlenoPis eriord i frn fh rudol

Mrosoa uhlio fouo.totr IFtonidot loaeluioeto 0 ntr ro Oloje ten fo i1

Er oto lig traaeoae inccl eetredoteace tudlyy htte-osoteo t rural- tor-ont of population -crha ..an rural tho d are " lt t

rural -If hro pol tto.uh sotd rrro-_ N-er-ord--hf focrofteaTlpuo atprotosorterreetosrpltot hcoatto

sa uluols olc bc ottteoxl, it or'th--rtsot,o tuoi cht tuoi -ga )tei;:t-Ioertatoet-oebotrhtt.otootouootttotOocleotPdectttpreprce o lio neoltos.rp19

ANNEX IPage 4 of 5

ECONOMIC DEVELOPMENT DATA

GNP PER CAPITA IN 1981 US$250

GROSS NATIONAL PRODUCT IN 1981/82 -/ ANNUAL RATE CF GROWTH (%, constant prices) -

USS Bln. x 1955/56-1959/60 1960/61-1964/65 1965/66-1969/70 1970/71-1974/75

GNP at Market Prices 165.38 100.0 3.7 3.6 3.6 2.9Gross Domestic Investment 41.74 25.2Gross National Saving 37.66 22.8Current Account Balance -4.08 -2.4

OUTPUT, LABOR FORCE AND PRODUCTIVITY IN 1978

Value Added (at factor cost) Labor Force i/ V.A. Per WorkerUS$ Bln. % Mil. % US$ 9 of National Average

Agriculture 39.8 39.6 180.6 70.7 220 56Industry 25.2 25.1 32.2 12.6 783 199Services 35.5 35.3 42.6 16.7 833 211Total/Average 100.5 100.0 255.4 100.0 394 100

GOVERN?MENT FIINANCFGeneral Governiment e/ _ Central Government

Rs. Bln. % of GDP Rs. Bi',. % of GDP1981/82 1981/82 1977/78-1981/82 1981/82 1981/82 1977/78-1981/82

Current Receipts 285.77 19.4 19.1 149.2F 10.1 10.4Current Expenditures 280.34 19.0 18.2 155.03 10.5 10.6

Current Surplus/Deficit 5.43 0.4 0.9 -5.75 -0.4 -0.2Capital Expenditures f/ 116.91 7.9 7.8 83.66 5.7 5.5E:ternal Assistacce (net) d/ 16.45 1.1 1.0

MONEY, CREDIT ANt PRICES .j70/71 1975/76 1976/77 1977/78 1978/79 1979/80 1980/81 1981/82 February 1982 February 1983',s Billion outstanding at end of period)

Money and Qua-i Money 110.2 224.8 277.8 329.1 401.1 472.3 554.5 625.5 615.5 711.7Bank Credit -o Government(net) ' .6 69.2 77.6 76.4 94.2 124.1 164.4 204.4 292.2 353.5Bank Cr - tc Commercial Secto. 65.2 156.2 188.5 212.2 255.3 310.1 362.8 430.4 422.2 487.7

(percentage or Index Numbers) April-Feb 1981/82 April-Feb 1982/83

Money and Qasi Moneyas % of GDP 27.4 30.3 34.6 36.5 41.2 44.1 43.3 42.5

.'holesaLe Pr 4e Index'i970/71 = 100) 100.0 173.0 176.6 185.8 185.8 217.6 257.3 281.3 281.7 2-4 i287.3

Annual percentage changes in:

Wholesale Price nidex 7.7 -1.1 2.1 5.2 - 17.1 18.2 9.3 10.0 3 2.0

Bank Credit to Gove aiment (net) 15.0 6.3 11.1 16.3 16.0 25.6 29.6 19.1 22.7 y/ 1 21.0Bank C-edit to Commercial Sector -j.5 22.7 20.7 12.6 20.3 21.5 17.0 18.7 20.9 i/ 15.5 hi

a/ The p,c capita GNP ustimate is at market trices, using World Bank Atlas methodology, base period 1979-1981.

All other conversions to d,l1ars in this table are at the average exchange rate prevailing during the period covered.b/ Quick -stimrates, Central Statistical Organization,c/ Computed from tiend line of GNP at factor cost series, including one observation before first year and one observation after last

year of listed period.d/ World Bank es:imates of net disbursement; not necessarily consistent with official figures.e/ Transfers between Centre and States have been riected out.f/ All loans a-sd advances to third ,arties have been netted out.g/ Percentage change 'om end-M ch 1981 to end-February 1982.h/ Percentsge change rrom end-March 1982 to end-February 1983.i' Total Labor Force and percentage breakdown from Sixth Five Year Plan, Table 2.6 and Annextre Table 13.8.

ANNEX IPage 5 of 5

BALANCE OF PAYMENTS 1979/80 1980/81 1981/82 1982/83 MERCHANDISE EXPORTS (AVERAGE 1978/79-1981/82)(US$ iMl.) US5$ Mml. %

Exports of Goods q/ 7,948 8,504 8,511 8,800 Engineering Goods 901 11Imports of Goods -11,383 -16,119 -15,253 -14,801 Tea 457 6Trade Balance -3,435 -7,615 -6,742 -6,001 Gems 759 10NFS (net) 1,042 1,365 1,120 1,088 Clothing 556 7

Leather & Leather Products 470 6Resource Balance -2,393 -6,250 -5,622 -4,913 Jute Manufactures 279 4

Iron Ore 352 4Interest Income (net) k/ 287 600 212 -128 Cotton Textiles 319 4Net Transfers 1/ 1,852 2,771 1,577 1,668 Sugar 104 1

Others 3,789 47Balance on Current Account -254 -2,879 -3,833 -3,373

Official Aid Total 7,986 100

Gross Disbursements 1,218 1,629 1,821 1,933 EXTERNAL DEBT, MARCH 31, 1982Amortization 1,894 2,338 2,475 2,569

US$ billion

Transactions with IMF - 1,035 690 1,980 Outstanding and Disbursed 18.3All Other Items o/ -740 -130 -1,075 -358 Undisbursed 8.5

Outstanding, including 26.8Increase in Reserves (-) -224 345 2,397 -182 UndisbursedGross Reserves (end year) p/ 7,204 6,859 4,462 4,644Net Reserves (end year) m/ 7,204 6,532 3,498 1,703 DEBT SERVICE RATlu iOR 1981/82 _/ n7 8.9 per cent

Fuel and Related Materials IBRD/IDA LENDING,as of Februarv 28. 1983

Imports (Petroleum) g/ 4,046 6,657 5,570 4,686 US$ millionIBRD IDA

Outstanding and Disbursed 1,357 6,688Undisbursed 1,896 4,270Outstanding including

Undisbursed 3,253 10,958

RATE OF EXCHANGE

June 1966 to mid-December 1971 US$1.00 - Rs 7.50 Spot Rate end-March 1983: US$1.00 = Rs 10.03Re 1.00 - US$0.13333 Rs 1.00 = US$0.0997

Mid-December 1971 to end-June 1972: US$1.00 = Rs 7.27927Rs 1.00 = US$O.137376

After end-June 1972 Floating Rate

Spot Rate end-December 1981 US$1.00 Rs 9.099Rs 1.00 = US$0.110

Spot Rate end-December 1982 : US$1.00 Rs 9.634Rs 1.00 US$0.104

J/ Estimated.k/ Figures given cover all investment income (net). Major payments are interest on foreign loans and charges paid to

IMF, and major receipts is interest earned on foreign assets.1/ Figures given include workers' remittances but exclude official grant assistance which is included within

official aid disbursements.m/ Excludes net use of INF credit.n/ Amortization and interest payments on foreign loans as a percentage of exports of goods and services.and current transfers.o/ Includes commercial borrowing.p/ Excluding gold.q/ Net of crude petroleum exports.

I

ANNEX IIPage 1 of 4

THE STATUS OF BANK GROUP OPERATIONS IN INDIA

A. STATEMENT OF BANK LOANS AND IDA CREDITS(As of September 30, 1983)

US$ millionLoan or Fiscal (Net of Cancellations)Credit Year ofNo. Approval Purpose Bank IDA 1/ Undisbursed 2/

48 Loans/ 1,688.0 - -

83 Credits fully disbursed - 4,759.0 -

482-IN 1974 Karnataka Dairy - 30.0 11.56502-IN 1975 Rajasthan Canal CAD - 83.0 6.83521-IN 1975 Rajasthan Dairy - 27.7 6.30522-IN 1975 Madhya Pradesh Dairy - 16.4 -0.11598-IN 1976 Fertilizer Industry - 105.0 3.12604-IN 1976 Power Transmission IV - 150.0 3.95610-IN 1976 Integrated Cotton Development - 18.0 3.25

1251-IN 1976 Andhra Pradesh Irrigation 145.0 - 44.921273-IN 1976 National Seeds I 25.0 - 15.891335-IN 1977 Bombay Urban Transport 25.0 - 4.77680-IN 1977 Kerala Agric. Development - 30.0 13.37682-IN 1977 Orissa Agric. Development - 20.0 3.30685-IN 1977 Singrauli Thermal Power - 150.0 7.45690-IN 1977 West Bengal Agricultural

Extension & Research - 12.0 10.291394-IN 1977 Gujarat Fisheries 14.0 - 4.08712-IN 1977 M.P. Agric. Development - 10.0 0.49720-IN 1977 Periyar Vaigai Irrigation - 23.0 6.99728-IN 1977 Assam Agricultural Development - 8.0 3.96736-IN 1978 Maharashtra Irrigation - 70.0 4.05

1475-IN 1978 Industry DFC XII 78.5 - 2.49747-IN 1978 Second Foodgrain Storage - 107.0 61.57756-IN 1978 Calcutta Urban Development II - 87.0 6.51761-IN 1978 Bihar Agric. Extension &

Researc' - 8.0 5.811511-IN 1978 IDBI Joint/Public Sector 25.0 - 2.541549-IN 1978 Third Trombay Thermal Power 105.0 - 8.38788-IN 1978 Karnataka Irrigation - 117.6 52.30793-IN 1978 Korba Thermal Power - 200.0 47.64806-IN 1978 Jammu-Kashmir Horticulture - 14.0 11.01808-IN 1978 Gujarat Irrigation - 85.0 19.30815-IN 1978 Andhra Pradesh Fisheries - 17.5 9.98816-IN 1978 National Seeds II - 16.0 8.88

1592-IN 1978 Telecommunications VII 120.0 - 22.27824-IN 1978 National Dairy - 150.0 76.70842-IN 1979 Bombay Water Supply II - 196.0 156.24844-IN 1979 Railway Modernization

& Maintenance - 190.0 48.31848-IN 1979 Punjab Water Supply & Sewerage - 38.0 8.48855-IN 1979 National Agricultural Research - 27.0 18.96862-IN 1979 Composite Agricultural Extension - 25.0 7.58

ANNEX II

Page 2 of 4

US$ millionLoan or Fiscal (Net of Cancellations)Credit Year of

No. Approval Purpose Bank IDA 1/ Undisbursed 2/

871-IN 1979 National Cooperative DevelopmentCorporation - 30.0 5.51

1648-IN 1979 Ramagundam Thermal Power 50.0 - 50.00874-IN 1979 Ramagundam Thermal Power - 200.0 41.57889-IN 1979 Punjab Irrigation - 129.0 61.80899-IN 1979 Maharashtra Water Supply - 48.0 15.25911-IN 1979 Rural Electrification Corp. II - 175.0 21.96925-IN 1979 Uttar Pradesh Social Forestry - 23.0 8.05954-IN 1980 Maharashtra Irrigation II - 210.0 82.85961-IN 1980 Gujarat Community Forestry - 37.0 15.27963-IN 1980 Inland Fisheries - 20.0 17.90981-IN 1980 Population II - 46.0 36.41

1003-IN 1980 Tamil Nadu Nutrition - 32.0 23.971011-IN 1980 Gujarat Irrigation II - 175.0 121.651012-IN 1980 Cashewnut - 22.0 18.241027-IN 1980 Singrauli Thermal II - 300.0 213.361028-IN 1980 Kerala Agricultural Extension - 10.0 8.991033-IN 1980 Calcutta Urban Transport - 56.0 23.211034-IN 1980 Karnataka Sericulture - 54.0 41.381046-IN 1980 Rajasthan Water Supply & Sewerage - 80.0 61.541843-IN 1980 Industry DFC XIII 100.0 - 10.611887-IN 1980 Farakka Thermal Power 25.0 - 25.001053-IN 1980 Farakka Thermal Power - 225.0 170.601897-IN 1981 Kandi Watershed and

Area Development 30.0 - 23.461925-IN 1981 Bombay High Offshore Development 400.0 - 7.411072-IN 1981 Bihar Rural Roads - 35.0 23.581078-IN 1981 Mahanadi Barrages - 83.0 72.771082-IN 1981 Madras Urban Development II - 42.0 29.041108-IN 1981 M.P. Medium Irrigation - 140.0 128.411112-IN 1981 Telecommunications VIII - 314.0 176.211116-IN 1981 Karnataka Tank Irrigation - 54.0 53.451125-IN 1981 Hazira Fertilizer Project - 400.0 281.641135-IN 1981 Maharashtra Agricultural Ext. - 23.0 20.241137-IN 1981 Tamil Nadu Agricultural Ext. - 28.0 23.881138-IN 1981 M.P. Agricultural Ext. II - 37.0 35.731146-IN 1981 National Cooperative

Development Corp. II - 125.0 106.341172-IN 1982 Korba Thermal Power Project II - 400.0 367.321177-IN 1982 Madhya Pradesh Major Irrigation - 220.0 199.762050-IN 1982 Tamil Nadu Newsprint 1]00.0 - 61.581178-IN 1982 West Bengal Social Forestry - 29.0 25.411185-IN 1982 Kanpur Urban Development - 25.0 21.682051-IN 1982 ICICI XIV 1]50.0 - 104.432076-IN 1982 Ramagundam Thermal Power II 300.0 - 300.002095-IN 1982 ARDC IV 190.0 - 121.321219-IN 1982 Andhra Pradesh Agricultural Ext. - 6.0 5.502123-IN 1982 Refineries Rationalization 200.0 - 171.602165-IN 1982 Rural Electrification III 304.5 - 300.002186-IN 1982 Kallada Irrigation 20.3 - 20.00

ANNEX IIPage 3 of 4

US$ millionLoan or Fiscal (Net of Cancellations)Credit Year ofNo. Approval Purpose Bank IDA 1/ Undisbursed 2/

1269-IN 1982 Kallada Irrigation - 60.0 45.331280-IN 1983 Gujarat Water Supply - 72.0 71.391286-IN 1983 Jammu/Kashmir and

Haryana Social Forestry - 33.0 31.061288-IN 1983 Chambal Madhya Pradesh - -

Irrigation II - 31.0 26.941289-IN 1983 Subernarekha Irrigation - 127.0 121.372205-IN 1983 Krishna-Godavari Exploration 165.5 - 158.922210-IN 1983 Railways Modernization &

Maintenance II 200.0 - 197.041299-IN 1983 Railways Modernization &

Maintenance II - 200.0 197.012241-IN 1983 South Bassein Gas Development 222.3 - 219.011319-IN 1983 Haryana Irrigation II - 150.0 143.601332-IN 1983 U.P. Public Tubewells II - 101.0 101.001356-IN 1983 Upper Indravati Hydro Power - 170.0 170.002278-IN 1983 Upper Indravati Hydro Power 156.4 - 156.011369-IN 1983 Calcutta Urban Development III* - 147.0 147.001383-IN 1983 Maharashtra Water Utilization - 32.0 32.002308-IN 1983 Maharashtra Water Utilization 22.7 - 22.642283-IN 1983 Central Power Transmission* 250.7 - 250.702295-IN 1983 Himalayan Watershed Management 46.2 - 46.082329-IN 1983 Madhya Pradesh Urban* 24.1 - 24.101397-IN 1984 Orissa Irrigation II* - 105.0 105.00

Total 5,183.2 11,851.2of which has been repaid 1P251.2 136.1

Total now outstanding 3,932.0 11,715.1Amount Sold 133.8of which has been repaid 133.8 - -

Total now held by Bank and IDA 3/ 3,932.0 11,715.1

Total undisbursed (excluding *) 2,100.45 4,124.24

1/ IDA Credit amounts for SDR-denominated Credits are expressed in terms of theirUS dollar equivalents, as established-at the time of Credit negotiations and assubsequently presented to the Board.

2/ Undisbursed amounts for SDR-denominated IDA Credits are derived from cumulativedisbursements converted to their US dollar equivalents at the SDR/US dollarexchange rate in effect on the dates of disbursement.

3/ Prior to exchange adjustment.

* Not yet effective.

ANNEX IIPage 4 of 4

B. STATEMENT OF IFC INVESTMENTS(As of September 30, 1983)

Fiscal Amount (US$ million)'Year Company Loan Equity Total

1959 Republic Forge Company Ltd. 1.5 - 1.51959 Kirloskar Oil Engines Ltd. 0.8 - 0.8l960 Assam Sillimanite Ltd. 1.4 - 1.4L961 K.S.B. Pumps Ltd. 0.2 - 0.2

L963-66 Precision Bearings India Ltd. 0.6 0.4 1.0l964 Fort Gloster Industries Ltd. 0.8 0.4 1.2L964-75-79 Mahindra Ugine Steel Co. Ltd. 11.8 1.3 13.11964 Lakshmi Machine Works Ltd. 1.0 0.3 1.3L967 Jayshree Chemicals Ltd. 1.1 0.1 1.21967 Indian Explosives Ltd. 8.6 2.9 11.51969-70 Zuari Agro-Chemicals Ltd. 15.1 3.8 18.91976 Escorts Limited 6.6 - 6.61978 Housing Development Finance

Corporation 4.0 1.2 5.21980 Deepak Fertilizer and

Petrochemicals Corporation Ltd. 7.5 1.2 8.71981 Coromandel Fertilizers Limited 15.9 15.91981 Tata Iron and Steel Company Ltd. 38.0 - 38.01981 Mahindra, Mahindra Limited 15.0 - 15.0

1981 Nagarjuna Coated Tubes Ltd. 2.9 0.3 3.21981 Nagarjuna Signode Limited 2.3 - 2.31981 Nagarjuna Steels Limited 1.5 0.2 1.7

1982 Ashok Leyl,and Limited 28.0 - 28.01982 The Bombay Dyeing and

Manufacturing Co. Ltd. 18.8 - 18.81982 Bharat Forge Company Ltd. 15.7 - 15.71982 The Indian Rayon Corp. Ltd. 8.3 - 8.31984 The Gwalior Rayon Silk Manu-

facturing (Weaving) Co. Litd. 4.2 - 4.2

TOTAL GROSS COMMITMENTS 211.6 12.1 223.7

Less: SoLd 53.0 3.4 56.4

Repaid 30.1 - 30.1

Cancelled 16.1 1.4 17.5

Now Held 112.4 7.3 119.7

Undisbursed 82.9 - 82.9

ANNEX III

INDIA

CAMBAY BASIN PETROLEUM PROJECT

SUPPLEMENTARY PROJECT DATA SHEET

Section I: Timetable of Key Events

(a) Time taken by the country to prepare the project

About two years.

(b) The agency which has prepared the project

Ministry of Petroleum and the Oil and Natural GasCommission (ONGC).

(c) Date of first presentation to the Association anddate of first mission to consider the proiect

March 1983; July 1983.

(d) Date of departure of appraisal mission

September 1983.

(e) Date of completion of negotiations

March 1984.

(f) Planned date of effectiveness

June 30, 1984.

Section II: Special Implementation Actions

None

Section III: Special Conditions

Ci) Execution of a Subsidiary Loan Agreement betweenONGC and GOI is a condition of Loan effectiveness(para. 50).

(ii) GOI would undertake, by March 31, 1985, a heavy oilutilization study, discuss with the Bank and take thenecessary steps to ensure utilization or sale of theheavy o:il (para. 47).

ANNEX IV

INDIA

CAMBAY BASIN PETROLEUM PROJECT

PROCUREMENT ARRANGEMENTS(US$ million)

Procurement Method TotalProiect Component ICB LCB Other N.A.a/ Cost

1. ExplorationSeismic, Drill. & Well Services 76.2 14.2 1.7 b/ 3.7 95.7

(59.9) (59.9)

Well Materials & Consumables 7.8 2.8 2.4 c/ 3.0 16.0(1.7) (0.3) (2.0)

Sub Total 84.0 17.0 4.1 6.7 111.8(61.6) (0.3) (61.9)

2. Development & ProductionDrill. & Tech. Well Services 152.7 - 9.4 30.1 192.2

(118.2) (118.2)

Well Materials & Consumables 193.2 28.6 27.6 d/ 76.7 326.1(11.0) (1.0) (12.0)

Force Account - - 87.0 b/ - 87.0

Rigs, Equipment & Surf.Facilities 79.0 102.7 2.8 32.7 217.2

(35.3) _ (2.0) (37.3)

Sub Total 424.9 131.3 126.8 139.5 822.5(164.5) (3.0) (167.5)

3. EOR ProiectsDrill. Equip. & Consumables 5.0 - 2.7 2.8 10.5

(5.0) (2.0) (7.0)

4. Training & Tech. AssistanceEquip., Consult. & Supervision 1.5 1.9 4.5 1.0 8.9

(1.5) (4.0) (5.5)

TOTAL 515.4 150.2 138.1 150.0 953.7(232.6) (9.3) (241.9)

a/ Customs Dutiesb/ Force Accountc/ Includes fuel (US$1.3 million)d/ Fuel only

Notes: (i) Figures in parentheses are the respective amounts financed by the Bank.(ii) The front-end fee, US$0.6 million, is not included in the above table.

IBRD 17603

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