CONFORMED COPY

CREDIT NUMBER 520 IN

Project Agreement(Sindri Fertilizer Project)

BETWEEN

INTERNATIONAL DEVELOPMENT ASSOCIATION

AND

FERTILIZER CORPORATION OF INDIA

DATED DECEMBER 18, 1974

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CONFORMED COPY

CREDIT NUMBER 520 IN

Project Agreement(Sindri Fertilizer Project)

BETWEEN

INTERNATIONAL DEVELOPMENT ASSOCIATION

AND

FERTILIZER CORPORATION OF INDIA

DATED DECEMBER 18, 1974

PROJECT AGREEMENT

AGREEMENT, dated December 18, 1974, between INTERNATIONAL

DEVELOPMENT ASSOCIATION (hereinafter called the Association) and

FERTILIZER CORPORATION OF INDIA (hereinafter called FCI).

WHEREAS by the Development Credit Agreement of even date herewith

between India, acting by its President (hereinafter called the Borrower) and the

Association, the Association has agreed to make available to the Borrower an

amount in various currencies equivalent to ninety-one million dollars ($91,000,000),

on the terms and conditions set forth in the Development Credit Agreement, but

only on condition that FCI agree to undertake such obligations toward the

Association as hereinafter set forth;

WHEREAS by a subsidiary loan agreement to be entered into between the

Borrower and FCI, the proceeds of the credit provided for under the Development

Credit Agreement will be made available to FCI on the terms and conditions therein

set forth; and

WHEREAS FCI, in consideration of the Association's entering into the

Development Credit Agreement with the Borrower, has agreed to undertake the

* obligations hereinafter set forth;

NOW THEREFORE the parties hereto hereby agree as follows:

ARTICLE I

Definitions

Section 1.01. Wherever used in this Agreement, unless the context shall

otherwise require, the several terms defined in the Development Credit Agreement

and in the General Conditions (as so defined) have the respective meanings therein

set forth.

ARTICLE II

Execution of the Project

Section 2.01. FCI shall carry out the Project described in Schedule 2 to

the Development Credit Agreement with due diligence and efficiency and in

conformity with appropriate administrative, financial and engineering practices, and

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shall provide, or cause to be provided, promptly as needed, the funds, facilities,services and other resources required for the purpose.

Section 2.02. In order to assist FCI in process and engineering design,procurement, construction and start-up, FCI shall obtain licenses and plant designsand engage consultant services acceptable to the Association upon terms and

conditions satisfactory to the Association.

Section 2.03. Except as the Association shall otherwise agree, FCI shall:

(a) in carrying out the Project, act as managing contractor and employcompetent and experienced contractors, as necessary, to carry out any part ofthe Project;

(b) employ, for the duration of the Project, a suitably qualified and

experienced Project Manager to be responsible for the execution of the Project,including, inter alia, budget and schedule control and general engineering,procurement, and construction duties, and provide the Project Manager withadequate staff and facilities to carry out such functions; and

(c) consult with the Association before making any change in the positionof th: Project Manager in the Sindri Unit.

Section 2.04. (a) Except as the Association shall otherwise agree, the goods,

works and services (other than consultants' services) for the Project to be financedout of the proceeds of the Credit, shall be procured in accordance with theprovisions of Schedule I to this Agreement.

(b) If at any time the Association or FCI determines, after consultationwith each other and the Borrower, that any equipment or material cannot bedelivered on or prior to its scheduled delivery date, and that such delay wouldadversely affect completion of the Project, FCI shall promptly take necessary actionto procure such equipment or material by such procedures as shall be satisfactoryto the Borrower and the Association.

Section 2.05. (a) FCI undertakes to insure, or make adequate provision forthe insurance of, the imported goods to be financed out of the proceeds of theCredit relent to it by the Borrower against hazards incident to the acquisition,transportation and delivery thereof to the place of use or installation, and forsuch insurance any indemnity shall be payable in a currency freely usable by FCIto replace or repair such goods.

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(b) Except as the Association may otherwise agree, FCI shall cause all

goods and services financed out of the proceeds of the Credit relent to it by theBorrower to be used exclusively for the Project.

Section 2.06. (a) FCI shall furnish to the Association promptly upon their

preparation, the plans, specifications, reports, contract documents and construction

and procurement schedules for the Project, and any material modifications thereof

or additions thereto, in such detail as the Association shall reasonably request.

(b) FCI: (i) shall maintain records adequate to record the progress of the

Project (including the cost thereof) and to identify the goods and services financed

out of the proceeds of the Credit relent to it by the Borrower, and to disclosethe use thereof in the Project- (ii) shall, without limitation upon the provisionsof paragraph (c) of this Section, enable the Association's representatives to visitthe facilities and construction sites included in the Project, and to examine thegoods financed out of such proceeds and any relevant records and documents:and (iii) shall furnish to the Association all such information as the Associationshall reasonably request concerning the Project, the expenditure of the proceedsof the Credit relent to it and the goods and services financed out of such proceeds.

(c) FCI shall enable the Association's representatives to examine all plants,installations, sites, works, buildings, property and equipment of FCI and anyrelevant records and documents.

Section 2.07. FCI shall use its best endeavors to carry out the Project:

(i) in accordance with a critical path network set forth in theDrawing No. CPM-IE-1017 of FCI, submitted to and approvedby the Association and, in that regard, shall give special attentionto the timely procurement of critical equipment; and

(ii) in accordance with an implementation plan set forth in SindriFertilizer Project Implementation Plan dated October 10, 1974,submitted to and approved by the Association.

Section 2.08. Except as the Association shall otherwise agree, FCI shall:

(a) complete the Sindri Renovation Program prior to June 30, 1977:

(b) prior to December 31, 1975, make arrangements satisfactory to theAssociation with appropriate agencies and corporations for the supply of heavy

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fuel oil, phosphate rock, water and coal, to ensure the timely availability of such

supplies in sufficient quantity and of appropriate quality for the full utilization

of the facilities at the Sindri Unit after completion of the Project; and

(c) prior to February 28, 1975, engage consultants for undertaking a studyentitled Works Transformation and Environmental Study of the Sindri Unit, setforth in the document dated October 10, 1974 submitted to and approved bythe Association. FCI shall consult with the Association with a view to theimplementation of recommendations arising from the said study in a form andin accordance with a schedule satisfactory to the Association.

Section 2.09. FCI shall duly perform all its obligations under the SubsidiaryLoan Agreement. Except as the Association shall otherwise agree, FCI shall nottake or concur in any action which would have the effect of amending, abrogating,assigning or waiving the Subsidiary Loan Agreement or any provision thereof.

Section 2.10. (a) FCI shall at the request of the Association, exchange viewswith the Association with regard to the progress of the Project, the performanceof its obligations tinder this Agreement and under the Subsidiary Loan Agreement,and other matters relating to the purposes of the Credit.

(b) FCI shall promptly inform the Association of any condition whichinterferes or threatens to interfere with, the progress of the Project, the

accomplishment of the purposes of the Credit, or the performance by FCI of itsobligations under this Agreement and under the Subsidiary Loan Agreement.

Section 2.11. FCI shall take all measures necessary to ensure that theexecution and operation of the Project is carried out with due regard to ecologicaland environmental factors, and shall comply with the environmental qualitystandards satisfactory to the Association.

ARTICLE III

Management and Operations of FCI

Section 3.01. FCI shall take out and maintain with responsible insurers, ormake other provision satisfactory to the Association for, insurance against suchrisks and in such amounts as shall be consistent with appropriate practice.

Section 3.02. FCi shall:

(a) at all times manage its affairs, maintain its financial position, plan itsfuture expansion and carry on its operations in accordance with appropriate

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business, financial and engineering practices and under the supervision of

experienced and competent management assisted by adequate and competent staff;

(b) promptly staff with experienced and competent personnel any vacant

position related to the construction and operation of the facilities under the Project;

and

(c) appoint, after consultation with the Association, a suitably qualified

successor if it appears that a vacancy will occur in the position of the General

Manager of the Sindri Unit.

Section 3.03. Except as the Association shall otherwise agree, FCl shall:

(a) at all times take all steps which are necessary to maintain its existence

and its right to carry on operations and to acquire and retain ownership of all

lands and to maintain and renew all interests in land and other properties and

all rights, powers, privileges and franchises which are necessary or useful in the

carrying out of the Project or in the conduct of its business;

(b) at all times operate and maintain its plants, machinery, equipment and

other property, and promptly make all necessary repairs and renewals thereof, in

accordance with appropriate engineering practices;

(c) not sell, lease, transfer or otherwise dispose of' any of its property

or assets which shall be required for the efficient operation of its business and

undertaking; and

(d) not alter its corporate structure or amend its Memorandum or Articles

of Association in any way that will materially and adversely affect its ability to

perform its obligations under this Agreement.

Section 3.04. In the event of any operational problems after start-up of the

facilities constructed under the Project, FCI shall secure such outside operational

assistance as necessary, in consultation with the Association.

ARTICLE IV

Financial Covenants

Section 4.01. FCI shall maintain records adequate to reflect in accordance

with consistently maintained appropriate accounting practices its operations and

financial condition.

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Section 4.02. FCI shall: (i) have the Sindri Unit's and FC1's accounts andfinancial statements (balance sheets, statements of income and expenses and relatedstatements) for each fiscal year audited, in accordance with sound auditingprinciples consistently applied, by independent auditors acceptable to theAssociation; (ii) except as the Association shall otherwise agree, furnish to theAssociation as soon as available, but in any case not later than four months afterthe end of each such year, (A) certified copies of the financial statements forsuch year as so audited and (B) the report of such audit by said auditors, ofsuch scope and in such detail as the Association shall have reasonably requested;and (iii) furnish to the Association such other information concerning the accountsand financial statements of the Sindri Unit and FCL and the audit thereof as theAssociation shall from time to time reasonably request.

Section 4.03. Except as the Association shall otherwise agree, FCL shall:

(a) maintain separate accounts for the Sindri Unit and consolidatedaccounts for all FCI's operations; and

(b) furnish to the Association as soon as available, but in any case notlater than 30 days after the end of each quarter and fiscal year:

(i) quarterly consolidated financial statements (balance sheets,statements of income and expenses and cash flow) for FCI;

(ii) quarterly financial statements (balance sheets, statements ofincome and expenses, cash flow and related statements) for theSindri Unit; and

(iii) quarterly and annual forecast statements of production, incomeand cash flow for FCI and for the Sindri Unit.

Section 4.04. Except as the Association shall otherwise agree:

(a) FCI shall take all necessary steps, including in particular limiting itsindebtedness, to maintain a debt-equity ratio not greater than 50:50 for the SindriUnit and also for FCI on a consolidated basis.

(b) FCI shall: (i) maintain a ratio of current assets to current liabilities(hereinafter referred to as current ratio) of at least 1.2: 1; (ii) not declare dividendsor prepay any debt if, after the payment of such dividend (assuming such paymentwas made on the date of such declaration) or debt, FCl's current ratio shall beless than 1.5:1; and (iii) not cause or permit its Sindri Unit to prepay any of

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its outstanding debts or to transfer amounts from its accounts to the rest of FC1's

accounts, if such prepayment or transfer would reduce the Sindri Unit's current

ratio below 1.2: 1.

For the purpose of this Section:

(i) the term "debt" means any debt maturing by its terms more

than twelve months after the date on which it is originally

incurred;

(ii) the term "equity" means all unimpaired paid-in share capital

plus accumulated earnings or losses from prior fiscal years not

set apart for specific purposes;

(iii) the term "current assets" means stock of spares, cash (excluding

advances to contractors for construction of projects and for

additions to fixed assets), assets readily convertible into cash,

and all other assets which could in the ordinary course of

business be converted within one year into cash or assets readily

convertible into cash; and

(iv) the term "current liabilities" means liabilities due and payable

and all other liabilities which would be due and payable, or could

be called for payment, within one year, including the portion

of indebtedness falling due within one year.

ARTICLE V

Effective Date; Termination;Cancellation and Suspension

Section 5.01. This Agreement shall come into force and effect on the date

upon which the Development Credit Agreement becomes effective.

Section 5.02. (a) This Agreement and all obligations of the Association and

of FCI thereunder shall terminate on the earlier of the following two dates:

(i) the date on which the Development Credit Agreement shall

terminate in accordance with its terns' or

(ii) a date 16 years after the date of this Agreement.

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(b) If the Development Credit Agreement terminates in accordance with

its terms before the date specified in paragraph (a)(ii) of this Section, the

Association shall promptly notify FCI of this event.

Section 5.03. All the provisions of this Agreement shall continue in full force

and effect notwithstanding any cancellation or suspension under the Development

Credit Agreement.

ARTICLE VI

Miscellaneous Provisions

Section 6.01. Any notice or request required or permitted to be given or

made under this Agreement and any agreement between the parties contemplated

by this Agreement shall be in writing. Such notice or request shall be deemed

to have been duly given or made when it shall be delivered by hand or by mail,

telegram, cable, telex or radiogram to the party to which it is required or permitted

to be given or made at such party's address hereinafter specified or at such other

address as such party shall have designated by notice to the party giving such

notice or making such request. The addresses so specified are:

For the Association:

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

Cable address:

INDEVASWashington, D.C.

For FC1:

Fertilizer Corporation of India

F-43 South Extension Area Part IRing RoadNew Delhi - 49, India

Cable address:

FERTILIZERNew Delhi

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Section 6.02. Any action required or permitted to be taken, and any

documents required or permitted to be executed, under this Agreement on behalf

of FCI may be taken or executed by its Managing Director or such other person

or persons as FCI shall designate in writing.

Section 6.03. FCI shall furnish to the Association sufficient evidence of the

authority and the authenticated specimen signature of the person or persons who

will, on behalf of FCI take any action or execute any documents required or

permitted to be taken or executed by FCI pursuant to any of the provisions of

this Agreement.

Section 6.04. This Agreement may be executed in several counterparts, each

of which shall be an original, and all collectively but one instrument.

IN WITNESS WHEREOF, the parties hereto, acting through their

representatives thereunto duly authorized, have caused this Agreement to be signed

in their respective names in the District of Columbia, United States of America,

as of the day and year first above written.

INTERNATIONAL DEVELOPMENT ASSOCIATION

By Is / M. L. WeinerRegional Vice President

South Asia

FERTILIZER CORPORATION OF INDIA

By /s / T. N. KaulAuthorized Representative

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SCHEDULE 1

Procurement

A. General Procedures

1. Contracts shall be let under procedures consistent with those set forth in

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

published by the Bank in April 1972, as revised in October 1972 (hereinafter called

the Guidelines), on the basis of international competitive bidding, except as

provided hereunder.

2. Contracts for the procurement of (i) items proprietory or critical to the

process design, (ii) items or groups of items with limited sources of availability

whose timely supply is critical to efficient execution of the Project, and (iii) items

or groups of items estimated to cost the equivalent of $50,000 or less may be

placed after obtaining quotations from a restricted list of suppliers, provided that

prior approval of the Association is obtained for said items and, in respect of

(i) and (ii) above, for the list of suppliers.

3. Except as the Association shall otherwise agree, FCI shall prequalify all

bidders.

B. Evaluation and Comparison of Bids for Goods; Preference for Domestic

Manufacturers

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

goods: (i) bidders shall be required to state in their bid the c.i.f. (port of entry)

price for imported goods, or the ex-factory price for domestically-manufactured

goods; (ii) customs duties and other import taxes on imported goods, and sales

and similar taxes on domestically-suppled goods, shall be excluded; and (iii) the

cost to the Borrower of inland freight and other expenditures incidental to the

delivery of goods to the place of their use or installation shall be included.

2. Goods manufactured in India may be granted a margin of preference in

accordance with, and subject to, the following provisions:

(a) All bidding documents for the procurement of goods shall clearly

indicate any preference which will be granted, the information required to establish

the eligibility of a bid for such preference and the following methods and stages

that will be followed in the evaluation and comparison of bids.

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

following three groups:

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

shall have established to the satisfaction of the Borrower and

the Association that the manufacturing cost of such goods

includes a value added in India equal to at least 20% of the

ex-factory bid price of such goods.

(2) Group B: all other bids offering goods manufactured in India.

(3) Group C: bids offering any other goods.

(c) All evaluated bids in each group shall be first compared among-

themselves, eycluding any customs duties and other import taxes on goods to be

imported and any sales or similar taxes on goods to be supplied domestically, to

determine the lowest evaluated bid of each group. The lowest evaluated bid of

each group shall then be compared with each other, and if, as a result of this

comparison, a bid from group A or group B is the lowest, it shall be selected

for the award.

(d) If, as a result of the comparison under paragraph (c) above, the lowest

bid is a bid from group C, all group C bids shall be further compared with the

lowest evaluated bid from group A after adding to the c.i.f. bid price of the

imported goods offered in each group C bid, for the purpose of this further

comparison only, an amount equal to (i) the amount of customs duties and other

import taxes which a non-exempt importer would have to pay for the importation

of the goods offered in such group C bid, or (ii) 15% of the c.i.f. bid price of

such goods if said customs duties and taxes exceed 151/ of such price. If the group

A bid in such further comparison is the lowest, it shall be selected for the award,

if not, the lowest evaluated bid from group C shall be selected.

C. Review of Procurement Decisions by Association

1. Except as provided for in paragraph A.2 above, FCI shall, before initiating

procurement for equipment and materials, including qualification of suppliers,inform the Association in detail of the procedure to be followed and shall introduce

such modifications in said procedure as the Association shall reasonably request.

2. With respect to all contracts for equipment or materials estimated to cost

the equivalent of S300,000 or more:

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(a) FCI shall furnish to the Association, in sufficient time for its

comments, but not being later than the date upon which invitations to bid are

issued, the text of the invitations to bid and the specifications and other bidding

documents, and shall make such modifications in the said documents or procedures

as the Association shall reasonably request. Any further modification to the bidding

documents shall require the Association's concurrence before it is issued to the

prospective bidders.

(b) After bids have been received and evaluated, FCI shall, before a final

decision on the award is made, inform the Association of the name of the bidder

to which it intends to award the contract and the reasons for the intended award

and shall furnish to the Association, in sufficient time for its review, a detailed

report on the evaluation and comparison of the bids received, together with the

recommendation for award and such other information as the Association shall

reasonably request. The Association shall, if it determines that the intended award

would be inconsistent with the Guidelines or this Schedule, promptly inform the

Borrower and .FCI and state the reasons for such determination.

(c) The terms and conditions of the contract shall not, without the

Association's concurrence, materially differ from those on which bids were asked

or prequalification invited.

(d) Two conformed copies of the contract shall be furnished to the

Association promptly after its execution and prior to the submission to the

Association of the first application for withdrawal of funds from the Credit Account

in respect of such contract.

3. With respect to each contract to be financed out of the proceeds of the

Credit and not governed by the preceding paragraph, FCI shall furnish to the

Association promptly after its execution and prior to the submission to the

Association of the first application for withdrawal of funds from the Credit Account

in respect of such contract, two conformed copies of such contract, together, in

the case of any such contract estimated to cost the equivalent of $50,000 or more,with copies of the tender documents, the analysis of bids, recommendations for

award and such other information as the Association shall reasonably request. The

Association shall, if it determines that the award of the contract was not consistent

with the Guidelines or this Schedule, promptly inform the Borrower and FCI and

state the reasons for such determination.