OFFCIAL 1

DOCUMENTS

CREDIT NUMBER 2179 INLOAN NUMBER 3260 IN

Project Agreement

(Andhra Pradesh Cyclone Emergency Reconstruction Project)

among

INTERNATIONAL DEVELOPMENT ASSOCIATION

and

INTERNATIONAL BANK FOR RECONSTRUCTIONAND DEVELOPMENT

and

STATE OF ANDERA PRADESH

Dated ,23, 1990

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CREDIT NUMBER 2179 INLOAN NUMBER 3260 IN

PROJECT AGREEMENT

AGREEMENT, dated 6z ?Z'962 23, 1990, among INTERNATIONALDEVELOPMENT ASSOCIATION (the Association), INTERNATIONAL BANK FORRECONSTRUCTION AND DEVELOPMENT (the Bank) and STATE OF ANDHRAPRADESH (Andhra Pradesh).

WHEREAS (A) by the Development Credit Agreement of even dateherewith between India (the Borrower) and the Association, the Asso-ciation has agreed to make available to the Borrower an amount invarious currencies equivalent to one hundred twenty-six million onehundred thousand Special Drawing Rights (SDR 126,100,000), on theterms and conditions set forth in the Development Credit Agreement,but only on condition that Andhra Pradesh agree to undertake suchobligations toward the Association as are set forth in this Agree-ment;

(B) by the Loan Agreement of even date herewith between theBorrower and the Bank, the Bank has agreed to make available to theBorrower an amount in various currencies equivalent to forty milliondollars ($40,000,000), on the terms and conditions set forth in theLoan Agreement, but only on condition that Andhra Pradesh agree toundertake such obligations toward the Bank as are set forth in thisAgreement; and

WHEREAS Andhra Pradesh, in consideration of the Association'sentering into the Development Credit Agreement with the Borrower,and the Bank's entering into the Loan Agreement with the Borrowerhave agreed to undertake the obligations set forth in this Agree-ment;

NOW THEREFORE the parties hereto hereby agree as follows:

ARTICLE I

Definitions

Section 1.01. Unless the context otherwise requires, theseveral terms defined in the Development Credit Agreement, the LoanAgreement, the Preamble to this Agreement and in the General Condi-tions (as so defined in the Development Credit Agreement and theLoan Agreement, respectively) have the respective meanings thereinset forth.

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ARTICLE II

Execution of the Project

Section 2.01. (a) Andhra Pradesh hereby declares its commit-ment to the objectives of the Project as set forth in Schedule 2 tothe Development Credit Agreement, and, to this end shall carry outthe Project, with due diligence and efficiency and in conformitywith appropriate administrative, financial and engineering prac-tices, and shall provide, promptly as needed, the funds, facilities,services and other resources required for the Project.

(b) Andhra.Pradesh shall make available to the Beneficia-ries, in accordance with the Participation Agreements, a portion ofthe proceeds of the Credit made available to Andhra Pradesh by theBorrower under Section 3.01 (b) of the Development Credit Agreement.

Section 2.02. Except as the Association shall otherwise agree,procurement of the goods, works and consultants' services requiredfor the Project and to be financed out of the proceeds of the Creditshall be governed by the provisions of the Schedule to this Agree-ment.

Section 2.03. Andhra Pradesh shall carry out the obligationsset forth in Sections 9.03, 9.04, 9.05, 9.06, 9.07 and 9.08 of theGeneral Conditions applicable to the Development Credit Agreementand in Sections 9.04, 9.05, 9.06, 9.07, 9.08 and 9.09 of the GeneralConditions applicable to the Loan Agreement (relating to insurance,use of goods and services, plans and schedules, records and reports,maintenance and land acquisition, respectively) in respect of theProject Agreement and the Project.

Section 2.04. (a) Andhra Pradesh shall, at the request of theAssociation, exchange views with the Association with regard to theprogress of the Project, the performance of its obligations underthis Agreement and other matters relating to the purposes of theCredit.

(b) Andhra Pradesh shall promptly inform the Association ofany condition which interferes or threatens to interfere with theprogress of the Project, the accomplishment of the purposes of theCredit, or the performance by Andhra Pradesh of its obligationsunder this Agreement.

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Section 2.05. Without limitation to the provisions of Section2.01 of this Agreement, Andhra Pradesh shall carry out such worksunder the Project as shall be acceptable to the Association.

Section 2.06. Without limitation to the provisions of Section2.01 of this Agreement, Andhra Pradesh shall carry out the worksunder the Project referred to in Section 2.05 of this Agreement inaccordance with plans and technical and environmental design andstandards acceptable to the Association.

Section 2.07. Andhra Pradesh shall by December 31, 1993increase the allocations for operations and maintenance of itsaffected irrigated areas by at least 80 percent of its presentlevel.

Section 2.08. Andhra Pradesh shall manage, monitor andevaluate the progress of the Project through the PMU.

Section 2.09. Without limitation to the generality of Section9.06 of the General Conditions of the Association and Section 9.07of the General Conditions of the Bank, Andhra Pradesh shall,commencing on January 1, 1991, and thereafter, furnish to theAssociation semi-annual reports on the progress of the Project, ofsuch scope and in such detail as the Association shall reasonablyrequest; such reports shall be furnished to the Association withinthree months after the end of each reporting period.

ARTICLE III

Financial Covenants

Section 3.01. (a) Andhra Pradesh shall maintain records andaccounts adequate to reflect in accordance with sound accountingpractices the operations, resources and expenditures, in respect ofthe Project of the departments or agencies of Andhra Pradeshresponsible for carrying out the Project.

(b) Andhra Pradesh shall:

(i) have the records and accounts referred to inparagraph (a) of this Section, for each fiscalyear audited, in accordance with appropri-ateauditing principles consistently applied, 6yindependent auditors acceptable to thAssociation;

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(ii) furnish to the Association, as soon as available,but in any case not later than nine months afterthe end of each such year a certified copy of thereport of such audit by said auditors, of suchscope and in such detail as the Association shallhave reasonably requested; and

(iii) furnish to the Association such other informationconcerning said records, accounts and financialstatements as well as the audit thereof, as theAssociation shall from time to time reasonablyrequest.

ARTICLE IV

Effective Date; Termination;Cancellation and Suspension

Section 4.01. This Agreement shall come into force and effecton the date upon which both the Development Credit Agreement and theLoan Agreement become effective.

Section 4.02. (a) This Agreement and all obligations of theAssociation, the Bank and of Andhra Pradesh thereunder shallterminate on the earlier of the following two dates:

(i) the date on which both the Development CreditAgreement and the Loan Agreement shall terminatein accordance with their respective terms; or

(ii) the date 20 years after the date of thisAgreement.

(b) If the Development Credit Agreement or the LoanAgreement or both of said Agreements terminate in accordance withtheir respective terms before the date specified in paragraph (a)(ii) of this Section, the Association and the Bank shall promptlynotify Andhra Pradesh of this event.

Section 4.03. All the provisions of this Agreement shallcontinue in full force and effect notwithstanding any cancellationor suspension under the General Conditions applicable to theDevelopment Credit Agreement or the Loan Agreement.

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ARTICLE V

Miscellaneous Provisions

Section 5.01. Any notice or request required or permitted tobe given or made under this Agreement and any agreement between theparties contemplated by this Agreement shall be in writing. Suchnotice or request shall be deemed to have been duly given or madewhen it shall be delivered by hand or by mail, telegram, cable,telex or radiogram to the party to which it is required or permittedto be given or made at such party's address hereinafter specifiedor at such other address as such party shall have designated bynotice to the party giving such notice or making such request. Theaddresses so specified are:

For the Association:

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

Cable address: Telex:

INDEVAS 197688 (TRT)Washington, D.C. 248423 (RCA)

64145 (WUI) or82987 (FTCC)

For the Bank:

International Bank for Reconstructionand Development

1818 H Street, N.W.Washington, D.C. 20433United States of America

Cable address: Telex:

INTBAFRAD 197688 (TRT)Washington, D.C. 248423 (RCA)

64145 (UI) or82987 (FTCC)

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For Andhra Pradesh:

Chief SecretaryGovernment of Andhra PradeshHyderabad, Andhra Pradesh500022, India

Cable address:

CHIEFSECHyderabadAndhra Pradesh, India

Section 5.02. Any action required or permitted to be taken,and any document required or permitted to be executed, under thisAgreement on behalf of Andhra Pradesh, may be taken or executed bythe Chief Secretary of Andhra Pradesh or such other person orpersons as Andhra Pradesh shall designate in writing, and AndhraPradesh shall furnish to the Association sufficient evidence of theauthority and the authenticated specimen signature of each suchperson.

Section 5.03. As long as the Bank has not given notice to thecontrary to Andhra Pradesh and so long as the Development CreditAgreement shall not have terminated prior to the termination of theLoan Agreement:

(a) the obligations of Andhra Pradesh to constilt with, andto furnish information, documents, plans, reports, records andstatements to, the Bank shall be satisfied to the extent performancein respect of such obligations is rendered to the Association;

(b) the obligations of the Bank to consult with, and tofurnish information to, Andhra Pradesh shall be satisfied to theextent such obligations are fulfilled by the Association; and

(c) all actions taken (including the giving of approvals orgranting of waivers) by the Association pursuant to the DevelopmentCredit Agreement shall be deemed to be taken pursuant to both theDevelopment Credit Agreement and the Loan Agreement, and in the nameand on behalf of both the Association and the Bank.

Section 5.04. This Agreement may be executed in severalcounterparts, each of which shall be an original, and allcollectively but one instrument.

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IN WITNESS WHEREOF, the parties hereto, acting through theirduly authorized representatives, have caused this Agreement to besigned in their respective names in the District of Columbia, UnitedStates of America, as of the day and year first above written.

INTERNATIONAL DEVELOPMENT ASSOCIATION

INTERNATIONAL BANK FOR RECONSTRUCTIONAND DEVELOPMENT

Regional Vice PresidentAsia

STATE OF ANDHRA PRADESH

Authorized Representative

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SCHEDULE

Procurement and Consultants' Services

Section I: Procurement of Goods and Works

PartA: International Competitive Bidding

Except as provided in Part C hereof, equipment and materialsshall be procured under contracts awarded in accordance withprocedures consistent with those set forth in Sections I and II ofthe "Guidelines for Procurement under IBRD Loans and IDA Credits"published by the Bank in May 1985 (the Guidelines).

Part B: Preference for Domestic Contractors

In the procurement of goods in accordance with the proceduresdescribed in Part A hereof, goods manufactured in India may begranted a margin of preference in accordance with, and subject to,the provisions of paragraphs 2.55 and 2.56 of the Guidelines andparagraphs 1 and 4 of Appendix 2 thereto.

Part C: Other Procurement Procedures

1. Except as provided in paragraphs 2 and 3 hereof, contractsfor civil works shall be awarded on the basis of competitivebidding, advertised locally, in accordance with proceduressatisfactory to the Association and the Bank.

2. Civil works, estimated to cost less than $100,000 equivalenteach, up to an aggregate amount not exceeding $25,000,000 equiva-lent, may be carried out through force account or may be procuredunder contracts awarded on the basis of bids invited from a list ofat least three contractors eligible under the Guidelines, inaccordance with procedures acceptable to the Association and theBank.

3. Civil works, esti'mated to cost less than $50,000 equivalenteach, up to an aggregate amount not exceeding $3,000,000 equivalent,may be procured under cost plus arrangements.

4. Except as provided in paragraph 5 hereof, equipment, materialsand vehicles estimated to cost less than $200,000 equivalent percontract may be procured under contracts awarded on the basis of

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competitive bidding, advertised locally, in accordance with proce-dures satisfactory to the Association and the Bank.

5. Equipment and materials, vehicles, and off the shelf items orgroups of items estimated to cost less than the equivalent of$50,000 per contract, up to an aggregate amount not exceeding$2,000,000 equivalent may be procured using quotations solicite4from a list of at least three suppliers eligible under the Guide-lines, in accordance with procedures satisfactory to the Associa-tion and the Bank.

6. Small contracts for civil works may be grouped in bid packagesof up to $120,000 equivalent, provided, however, that the total ofsuch groups does not exceed 40 percent of the total works for theminor irrigation component under Part A of the Project and 30 per-cent of the total works under the other Parts of the Project.

7. Goods and services to be financed under Part E (a) of theProject shall be purchased at a reasonable price, account beingtaken also of other relevant factors such as time of delivery andefficiency and, in the case of service, of their quality and thecompetence of the parties rendering them.

Part D: Review by the Association and the Bank of ProcurementDecisions

1. Review of invitations to bid and of proposed awards and finalcontracts:

(a) With respect to each contract for civil works, and forequipment, materials, and vehicles estimated to cost the equivalentof $5,000,000 and $500,000 or more, respectively, the procedures setforth in paragraphs 2 and 4 of Appendix 1 to the Guidelines shallapply. Where payments for such contract are to be made out of theSpecial Account, such procedures shall be modified to ensure thatthe two conformed copies of the contract required to be furnishedto the Association and the Bank pursuant to said paragraph 2 (d)shall be furnished to the Association and the Bank prior to themaking of the first payment out of the Special Account in respectof such contract.

(b) With respect to each contract not governed by the pre-ceding paragraph, the procedures set forth in paragraphs 3 and 4 ofAppendix 1 to the Guidelines shall apply. Where payments for suchcontract are to be made out of the Special Account, such procedures

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shall be modified to ensure that the two conformed copies of thecontract together with the other information required to be fur-nished to the Association and the Bank pursuant to said paragraph3 shall be furnished to the Association and the Bank as part of theevidence to be furnished pursuant to paragraph 4 of Schedule 3 tothe Development Credit Agreement.

(c) The provisions of the preceding subparagraph (b) shallnot apply to contracts on account of which the Association and theBank have authorized withdrawals from the Credit Account or the LoanAccount on the basis of statements of expenditure. Such contractsshall be retained in accordance with Section 4.01 (a) (ii) of theDevelopment Credit Agreement.

2. The figure of 15% is hereby specified for purposes ofparagraph 4 of Appendix 1 to the Guidelines.

Section II: Employment of Consultants

In order to assist Andhra Pradesh in carrying out of theProject, Andhra Pradesh shall employ consultants whose quali-fications, experience and terms and conditions of employment shallbe satisfactory to the Association and the Bank. Such consultantsshall be selected in accordance with principles and proceduressatisfactory to the Association and the Bank on the basis of the"Guidelines for the Use of Consultants by World Bank Borrowers andby the World Bank as Executing Agency" published by the Bank inAugust 1981.

INTERNATIONAL BANKFOR RECONSTRUCTION AND DEVELOPMENT

INTERNATIONAL DEVELOPMENT ASSOCIATION

CERTIFICATE

I hereby certify that the foregoing is a true copy of

the original in the archives of the International

Bank for Reconstruction and Development and the

international Development Association.

FOR SECRETARY