CONFORMED COPY

CREDIT NUMBER 250-IN

Development CreditAgreement

(Tamil Nadu Agricultural Credit Project)

BETWEEN

INDIA

AND

INTERNATIONAL DEVELOPMENT ASSOCIATION

DATED JUNE 11, 1971

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CONFORMED COPY

CREDIT NUMBER 250-IN

Development CreditAgreement

(Tamil Nadu Agricultural Credit Project)

BETWEEN

INDIA

AND

INTERNATIONAL DEVELOPMENT ASSOCIATION

DATED JUNE 11, 1971

AGREEMENT, dated June 11, 1971, between INDIA, act-ing by its President (hereinafter called the Borrower) and.INTERNATIONAL DEVELOPMENT ASSOCIATION (hereinaftercalled the Association).

WHEREAS (A) The Borrower has requested the Associa-tion to assist in the financing of the Project described inSchedule 2 to this Agreement by extending the Credit ashereinafter provided;

(B) By an agreement of even date herewif' between theAssociation and the State of Tamil Nadu, .. State ofTamil Nadu has agreed to undertake certain obligationsin respect of the carrying out of the Project;

(C) By an agreement of even date herewith among theAssociation, Agricultural Refinance Corporation, TamilNadu Cooperative State Land Development Bank and theState of Tamil Nadu, certain obligations in respect of thecarrying out of the Project have been undertaken by Agri-cultural Refinance Corporation, Tamil Nadu CooperativeState Land Development Bank and the State of TamilNadu; and

WHEREAS the Association has agreed, on the basis interalia of the foregoing, to extend the Credit to the Borrowerupon the terms and conditions hereinafter set forth.

Now THEREFORE the parties hereto hereby agree asfollows:

ARTICLE I

General Conditions; Definitions

SECTION 1.01. The parties to this Agreement accept allthe provisions of the General Conditions Applicable toDevelopment Credit Agreements of the Association, dated

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January 31, 1969, with the same force and effect as if theywere fully set forth herein, subject, however, to the follow-ing modifications thereof (said General Conditions Appli-cable to Development Credit Agreements of the Associa-tion, as -so modified, being hereinafter called the GeneralConditions) :

('a) Section 5.01 is deleted;

(b) Section 6.02 (h) is deleted and Section 6.02 (i) be-comes 6.02 (h);

(c) Paragraph 5 of Section 2.01 is amended to read asfollows: "5. The term 'Borrower' means India, acting byits President.";

(d) The following paragraph is added to Section 2.01:"The terms 'Project Agreement' and 'Tamil Nadu Agree-ment' have the meaning set forth in the Development CreditAgreement.";

(e) The words ", the Project Agreement and the TamilNadu Agreement" are added after the words "the Devel-opment Credit Agreement" in Section 6.06.

SECTION 1.02. Wherever used in this Agreement, unlessthe context otherwise requires, the several terms definedin the General Conditions have the respective meaningstherein set forth and the following additional terms havethe following meanings:

(a) " Tamil Nadu" means the State of Tamil Nadu, astate of India, or any successor thereof.

(b) "Andhra Pradesh" means the State of AndhraPradesh, a state of India, or any successor thereof.

(c) "Maharashtra" means the State of Maharashtra, astate of India, or any successor thereof.

(d) "Mysore" means the State of Mysore, a state ofIndia, or any successor thereof.

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(e) "ARC" means Agricultural Refinance Corporation,a statutory corporation established and organized underthe laws of the Borrower.

(f) "LDB" means Tamil Nadu Cooperative State LandDevelopment Bank, a cooperative society established andorganized under the laws of Tamil Nadu.

(g) "Project Agreement" means the agreement of evendate herewith between the Association, ARC, LDB andTamil Nadu, and all Schedules thereto, as the same maybe amended from time to time.

(h) "Tamil Nadu Agreement" means the agreement ofeven date herewith between Tamil Nadu and the Associa-tion, as the same may be amended from time to time.

(i) " Subsidiary Loan Agreement' neans the agreementto be entered into between the Borrower and ARC pursuantto Section 3.01 (d), and all Schedules thereto, if any, asthe same may be amended from time to time with theapproval of the Association.

(j) "Agricultural Loan" means any loan made or pro-posed to be made to a Beneficiary and to be financed outof the proceeds of the Credit.

(k) "Beneficiary" means (i) any person or enterprisecarrying out farm custom work in the territory of TamilNadu, or (ii) any farmer, group of farmers or cooperativefarming society, carrying out farm work in the territoryof Tamil Nadu, which is eligible to receive an AgriculturalLoan.

(1) "Participating Bank" means any bank, listed in theSecond Schedule to the Reserve Bank of India Act, 1934,which has entered into an agreement with ARC in accord-ance with Section 2.02 (b) of the Project Agreement.

(m) "Primary Bank" means any Primary Land Devel-opment Bank which is a member of LDB and which has

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entered into an agreement with LDB in accordance withSection 2.03 of the Project Agreement.

(n) "State Groundwater Directorate" means the direc-torate established by the Government of Tamil Nadu.

ARTICLE IIThe Credit

SECTION 2.01. The Association agrees to lend to the Bor-rower, on the terms and conditions in the DevelopmentCredit Agreement set forth or referred to, an amount invarious currencies equivalent to thirty-five million dollars($35,000,000).

SECTION 2.02. The amount of the Credit may be with-drawn from the Credit Account in accordance with the pro-visions of Schedule 1 to this Agreement, as such Scheduleshall be amended from time to time, for expenditures made(or, if the Association shall so agree, to be made) in respectof the reasonable cost of goods and services required forthe Project and to be financed under the DevelopmentCredit Agreement; provided, however, that, except as theAssociation shall otherwise agree, no withdrawal shall bemade on account of expenditures in the territories of anycountry which is not a member of the Bank (other thanSwitzerland) or for goods produced in, or services suppliedfrom, such territories.

SECTION 2.03. The Closing Date shall be December 31,1974 or such other date as shall be agreed between theBorrower and the Association.

SECTION 2.04. The Borrower shall pay to the Associationa service charge at the rate of three-fourths of one percent (3/4 of 1%) per annum on the principal amount of theCredit withdrawn and outstanding from time to time.

SECTION 2.05. Service charges shall be payable semi-annually on March 1 and September 1 in each year.

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SECTION 2.06. The Borrower shall repay the principalamount of the Credit in semi-annual installments payableon each March 1 and September 1 commencing Septem-ber 1, 1981 and ending March 1, 2021, each installment toand including the installment payable on March 1, 1991 tobe one-half of one per cent (1/2 of 1%) of such principalamount, and each installment thereafter to be one andone-half per cent (11/%) of such principal amount.

SECTION 2.07. The currency of the United Kingdom ofGreat Britain and Northern Ireland is hereby specified forthe purposes of Section 4.02 of the General Conditions.

ARTICLE III

Execution of the Project

SECTION 3.01. (a) The Borrower shall carry out theProject, or cause it to be carried out, with due diligenceand efficiency and in conformity with sound administrative,agricultural and financial practices, and shall provide,promptly as needed, the funds, facilities, services and otherresources required for the purpose.

(b) Without limitation or restriction upon any of theobligations of the Borrower set forth in paragraph (a) ofthis Section, the Borrower shall take all action requiredto ensure the prompt importation of the following goods,including the granting of all necessary licenses, foreignexchange permits and other approvals, without reconsid-eration of the eligibility of the items for importation: (i)that part of the equipment listed in paragraphs 1 and 3of Schedule 4 to this Agreement that may be procured fromoutside the territories of the Borrower in accordance withthe provisions contained in Schedule 3 to this Agreement;(ii) initial spare parts for the tractors imported under theProject in an amount equal to 15%o of the c.i.f. pricethereof; and (iii) for a period of four years commencingtwo years after the disbursement date in respect of eachconsignment of tractors financed under the Credit, spare

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parts for such tractors in an annual amount equal to 10oof the c.i.f. price of such tractors or such other amount asmay from time to time be agreed to between the Borrowerand the Association.

(c) The Borrower shall notify the Association of thefirms eligible to bid for tractors pursuant to paragraph1(a) of Schedule 3 to this Agreement, at the time of eachinvitation to bid.

(d) The Borrower shall enter into a Subsidiary LoanAgreement on terms and conditions (including inter aliathose set forth in Schedule 5 to this Agreement) satisfac-tory to the Association for the purpose of relending toARC for relending to LDB and Participating Banks theequivalent of the proceeds of the Credit in respect of Cate-gories I, II, III and IV of the allocation of the proceedsof the Credit set forth in Schedule 1 of this Agreement.The Borrower shall exercise its rights under the SubsidiaryLoan Agreement in such manner as to protect the interestsof the Borrower and the Association and to accomplish thepurposes of the Credit, and except as the Association -shallotherwise agree, the Borrower shall not assign, amend,abrogate or waive the Subsidiary Loan Agreement or anyprovision thereof.

(e) In order to assist Tamil Nadu in carrying out Part Cof the Project, the Borrower shall make available to TamilNadu the proceeds of the Credit in respect of Category Vof the allocation -of the proceeds of the Credit set forth inSchedule 1 of this Agreement.

(f) The operating policies and procedures for the carry-ing out of the Project shall be as set forth in Schedule 1to the Project Agreement.

SECTION 3.02. In order to assist Tamil Nadu, AndhraPradesh, Maharashtra and Mysore in carrying out PartD(2) of the Project, the Borrower shall have executed orcaused to have executed by not later than March 31, 1972,

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a contract with consultants to carry out the aerial surveyof the crystalline areas of these States. The appointmentof such consultants, the terms and periods of their employ-ment and their terms of reference shall be subject to theapproval of the Association prior to their appointment.

SECTION 3.03. The Borrower shall take and shall causeall its agencies to take all action which shall be necessaryon their part to enable (i) Tamil Nadu to perform all itsobligations under the Tamil Nadu Agreement, and (ii)ARC, LDB and Tamil Nadu to perform their obligationsunder the Project Agreement, and shall not take or permitany of its agencies to take any action which would preventor interfere with the performance of any such obligationsof ARC, LDB or Tamil Nadu.

SECTION 3.04. (a) The Borrower shall insure, or causeto be insured, or make, or cause to be made, adequate pro-vision for the insurance of the imported goods to be financedout of the proceeds of the Credit against hazards incidentto the acquisition, transportation and delivery thereof tothe place of use or installation, and for such insurance anyindemnity shall be payable in a currency freely usable bythe Borrower to replace or repair such goods. The Bor-rower shall keep the Association informed as to such insur-ance arrangements.

(b) Except as the Association shall otherwise agree, theBorrower shall cause all goods and services financed out ofthe proceeds of the Credit to be used exclusively for theProject.

SECTION 3.05. Except as the Association shall otherwiseagree, the goods and services to be financed out of the pro-ceeds of the Credit under Categories IV and V of the allo-cation of the proceeds of the Credit set forth in Schedule 1to this Agreement shall be procured in accordance withthe provisions set forth in Schedule 3 to this Agreement.

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ARTICLE IV

Other Covenants

So,PTIoN 4.01. (a) The Borrower shall cause ARC, LDBand Tamil Nadu to maintain records adequate to reflect inaccordance with consistently maintained sound accountingpractices their operations and financial condition.

(b) The Borrower shall cause ARC, LDB and TamilNadu to: (i) establish and maintain separate accounts inrespect of all funds disbursed and received on account ofthe Project; (ii) have their accounts and financial state-ments (balance sheets, statements of income and expensesand related statements) for each fiscal year audited, inaccordance with sound auditing principles consistentlyapplied, by independent auditors acceptable to the Asso-ciation; (iii) furnish to the Association as soon as avail-able, but in -any case not later than four months after theend of each such year, (A) certified copies of their financialstatements for such year as so audited and (B) the reportof such audit by said auditors, of such scope and in suchdetail as the Association shall have reasonably requested;and (iv) furnish to the Association such other informationconcerning their accounts and financial statements and theaudit thereof as the Association shall from time to timereasonably request.

SECTION 4.02. In order to assist the State GroundwaterDirectorate in its organization, staffing and operations, theBorrower shall employ, or cause to be employed, commenc-ing by a date not later than three months from the EffectiveDate, internationally recruited consultants acceptable tothe Association upon terms and conditions satisfactory tothe Association.

ARTICLE VConsultation, Information and Inspection

SECTION 5.01. The Borrower and the Association shallcooperate fully to assure that the purposes of the Credit

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will be accomplished. To that end, the Borrower and theAssociation shall from time to time, at the request of eitherparty:

(a) exchange views through their representatives withregard to the performance of their respective obligationsunder the Development Credit Agreement, the performanceby Tamil Nadu of its obligations under the Tamil NaduAgreement, the performance by ARC, LDB and TamilNadu of their obligations under the Project Agreement,the administration, operatioiis and financial condition ofARC, LDB and Tamil Nadu and, in respect of the Project,of the departments or agencies of the Borrower responsiblefor carrying out the Project or any part thereof, and othermatters relating to the purposes of the Credit; and

(b) furnish to the other all such information as it shallreasonably request with regard to the general status ofthe Credit. On the part of the Borrower, such informationshall include information with respect to financial and eco-nomic conditions in the territories of the Borrower, includ-ing its balance of payments, and the external debt of theBorrower, of any of its political subdivisions and of anyagency of the Borrower or of any such political subdivision.

SECTION 5.02. (a) The Borrower shall furnish or causeto be furnished to the Association all such information asthe Association shall reasonably request concerning theoperations and financial condition of ARC, LDB and TamilNadu and, in respect of the Project, of the departments oragencies of the Borrower responsible for carrying out theProject or any part thereof.

(b) The Borrower and the Association shall promptlyinform each other of any condition which interferes with,or threatens to interfere with, the accomplishment of thepurposes of the Credit, the maintenance of the servicethereof, the performance by either of them of its obhga-tions under the Development Credit Agreement, the per-formance by Tamil Nadu of its obligations under th Tamil

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Nadu Agreement, the performance by ARC of its obliga-tions under the Project Agreement and the Subsidiary LoanAgreement, or the performance by LDB and Tamil Naduof their respective obligations under the Project Agree-ment.

SECTION 5.03. The Borrower shall afford all reasonableopportunity for accredited representatives of the Associa-tion to visit any part of the territories of the Borrowerfor purposes related to the Credit.

ARTICLE VI

Taxes and Restrictions

SECTION 6.01. The principal of, and service charges on,the Credit shall be paid without deduction for, and freefrom, any taxes imposed under the laws of the Borroweror laws in effect in its territories.

SECTION 6.02. The Development Credit Agreement, theTamil Nadu Agreement and the Project Agreement shallbe free from any taxes on or in connection with the execu-tion, delivery or registration thereof, imposed under thelaws of the Borrower or laws in effect in its territories.

SECTION 6.03. The payment of the principal of, and serv-ice charges on, the Credit shall be free from all restrictions,regulations, controls and moratoria of any nature imposedunder the laws of the Borrower or laws in effect in itsterritories.

ARTICLE VII

Remedies of the Association

SECTION 7.01. If any event specified in Section 7.01 ofthe General Conditions or in Section 7.03 of this Agreementshall occur and shall continue for the period, if any, thereinset forth, then at any subsequent time during the continu-ance thereof, the Association, at its option, may by notice

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to the Borrower declare the principal of the Credit thenoutstanding to be due and payable immediately togetherwith -the service charges thereon and upon any such decla-ration such principal and service charges shall become dueand payable immediately, anything to the contrary in theDevelopment Credit Agreement notwithstanding.

SECTION 7.02. For the purpose of Section 6.02 of theGeneral Conditions, the following additional events arespecified:

(a) Tamil Nadu shall have failed to perform any of itsobligations under the Tamil Nadu Agreement; ARC, LDBor Tamil Nadu shall have failed to perform any of theirrespective obligations under the Project Agreement; orARC shall have failed to perform any of its obligationsunder the Subsidiary Loan Agreement.

(b) An extraordinary situation shall have arisen whichshall make it improbable that (i) Tamil Nadu will be ableto perform its obligations under the Tamil Nadu Agree-ment, or (ii) ARC, LDB or Tamil Nadu will be able toperform their respective obligations under the ProjectAgreement, or (iii) ARC will be able to perform its obli-gations under the Subsidiary Loan Agreement.

SECTION 7.03. For the purposes of Section 7.01 of theGeneral Conditions, the following additional events arespecified:

(a) any event specified in Section 7.02 of this Agreementshall occur and shall continue for a period of sixty daysafter notice thereof shall have been given by the Associa-tion to the Borrower and the defaulting party.

(b) ARC or LDB shall have become unable to pay anyof their debts as they mature or any action or proceedingshall have been taken by ARC or LDB or by others wherebyany of the property of ARC or LDB shall or may be dis-tributed among its creditors.

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(c) The Borrower or any other authority having juris-diction shall have taken any action for the dissolution ordisestablishment of ARC or LDB or for the suspension oftheir operation.

ARTICLE VIIIEffective Date; Termination

SECTION 8.01. The following events are specified as addi-tional conditions to the effectiveness of the DevelopmentCredit Agreement within the meaning of Section 10.01(b)of the General Conditions:

(a) The execution and delivery of the Tamil NaduAgreement on behalf of Tamil Nadu have been duly author-ized or ratified by all necessary governmental action.

(b) The execution and delivery of the Project Agreementon behalf of ARC, LDB and Tamil Nadu, respectively, havebeen duly authorized or ratified by all necessary corporateand governmental action.

(c) The execution and delivery of the Subsidiary LoanAgreement on behalf of the Borrower and ARC, respec-tively, have been duly authorized or ratified by all necessarycorporate and governmental action.

(d) Except as the Association and Tamil Nadu shallotherwise agree, Tamil Nadu has withdrawn all direct sub-sidies for wells.

(e) Tamil Nadu and its agencies have set rates for mech-anized land levelling custom services at a level sufficientto cover all costs and to provide a small operating surplus.

(f) The State Groundwater Directorate has an initialstaff which is acceptable to the Association.

(g) ARC has invited those banks listed in the SecondSchedule to the Reserve Bank of India Act, 1934, exceptingthe Tamil Nadu State Cooperative Bank Limited, to par-ticipate in the Project.

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(h) ARC, after consulting with the Government of TamilNadu, has informed the Association of: (i) the distributionand organization of all Primary Land Development Banksand such other arrangements as will ensure, to the satis-faction of the Association, the sound management, super-vision and financial independence of the Land DevelopmentBank system both as a whole and in its parts; and (ii) thenames and relevant particulars of Primary Land Develop-ment Banks and the banks invited by it in pursuance ofSection 8.01(g) which will be responsible for Project lend-ing in respect of minor irrigation investments in those areasof Tamil Nadu which are named in the Investment Programin Schedule 1 to the Project Agreement, and in respect ofother investments throughout Tamil Nadu. In determiningsuch nominations, the criteria which have been agreed be-tween the Association and ARC and which are set out in aside letter of even date, shall have been satisfied.

SECTION 8.02. The following are specified as additionalmatters, within the meaning of Section 10.02(b) of the Gen-eral Conditions, to be included in the opinion or opinionsto be furnished to the Association:

(a) that the Tamil Nadu Agreement has been dulyauthorized or ratified by, and executed and delivered onbehalf of, Tamil Nadu and constitutes a valid and bindingobligation of Tamil Nadu in accordance with its terms;

(b) that the Project Agreement has been duly author-ized or ratified by, and executed and delivered on behalfof, ARC, LDB and Tamil Nadu, respectively, and consti-tutes a valid and binding obligation of ARC, LDB andTamil Nadu in accordance with its terms; and

(c) that the Subsidiary Loan Agreement has been dulyauthorized or ratified by, and executed and delivered onbehalf of, the Borrower and ARC respectively, and consti-tutes a valid and binding obligation of the Borrower andARC in accordance with its terms.

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SECTION 8.03. The date September 30, 1971 is herebyspecified for the purposes of Section 10.04 of the GeneralConditions.

SECTION 8.04. On termination of the Project Agreementin accordance with its terms, the obligations of the Bor-rower with respect to the Project shall forthwith terminate.

ARTICLE IX

Representative of the Borrower; Addresses

SECTION 9.01. Any Secretary, Additional Secretary orJoint Secretary to the Government of India in the Ministryof Finance of the Borrower or the Director of the Depart-ment of Economic Affairs in the Ministry of Finance ofthe Borrower, acting singly, is designated as representativeof the Borrower for the purposes of Section 9.03 of theGeneral Conditions.

SECTION 9.02. The following addresses are specified forthe purposes of Section 9.01 of the General Conditions:

For the Borrower:

The Secretary to the Governmentof India

Ministry of FinanceDepartment of Economic AffairsNew Delhi, India

Cable address:EcofairsNew Delhi

For the Association:

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

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Cable address:IndevasWashington, D.C.

IN WITNESS WIIEREOF, the parties hereto, acting throughtheir representatives thereunto duly authorized, havecaused this Agreement to be signed in their respectivenames and to be delivered in the District of Columbia,United States of America, as of the day and year firstabove written.

INDIA

By /s/ L. K. JHAAuthorized Representative

INTERNATIONAL DEVELOPMENT AssOCIATION

By /s/ J. BuRKE KNAPPVice President

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SCHEDULE 1Withdrawal of the Proceeds of the Credit

1. The table below sets forth the categories of items to befinanced out of the proceeds of the Credit, the allocationof amounts of the Credit to each category and the per-centage of eligible expenditures so to be financed in eachCategory:

Amount of theCredit Allocated

(Expressed in % of ExpendituresCategory Dollar Equivalent) to be FinancedI Loans for minor 22,700,000 62% of total expendi-

irrigation tures pursuant to loansfor minor irrigation

II Loans for land 1,500,000 69% of total expendi-levelling tures pursuant to loans

for land levelling

III Loans for drainage 600,000 62% of total expendi-tures pursuant to loansfor drainage

IV Tractors and initial 5,000,000 100% of foreignspare parts expenditures

V Well-drilling equip- 2,700,000 100% of totalment and earth-moving expendituresmachinery

VI Consultancy services 2,500,000 100% of foreigna) Groundwater directorate expendituresb) Aerial survey

TOTAL 35,000,000

2. For the purposes of this Schedule:(a) the term "foreign expenditures" means expenditures

for goods produced in, or services supplied from, the ter-ritories, and in the currency, of any country other than theBorrower;

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(b) the term "local expenditures" means expendituresin the currency of the Borrower, or for goods produced in,or services supplied from, the territories of the Borrower;and

(c) the term "total expenditures" means the aggregateof foreign and local expenditures.

3. Notwithstanding the provisions of paragraph 1 above,no withdrawals shall be made in respect of :

(a) expenditures prior to the date of this Agreement;

(b) payments for taxes imposed under the laws of theBorrower or laws in effect in its territories on goods orservices, or on the importation, manufacture, procurementor supply thereof. To the extent that the amount repre-sented by the percentage set forth in the third column ofthe table in paragraph 1 above in respect of any Categorywould exceed the amount payable net of all such taxes, suchpercentage shall be reduced to ensure that no proceeds ofthe Credit will be withdrawn on account of payments forsuch taxes; and

(c) expenditures for freight and insurance within theterritories of the Borrower with respect to goods financedpursuant to Category V.

4. Notwithstanding the allocation of an amount of theCredit set forth in the second column of the table in para-graph 1 above, if the estimate of the expenditures underCategory II, IV, V, or VI shall decrease, the amount of theCredit then allocated to such Category and no longer re-quired therefor will be reallocated by the Association (sub-ject, however, to the requirements for contingencies, asdetermined by the Association, in respect of any other Cate-gories) by increasing correspondingly the amount allocatedto Category I and/or III and the Association will increasecorrespondingly (up to a maximum of 100o net of taxes)the percentage applicable to Category I and/or III.

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5. Notwithstanding the percentages set forth in the thirdcolumn -of the table in paragraph 1 above or the provisionsof paragraph 4 above, if the estimate of total expendituresunder Category I, II or III shall increase and no proceedsof the Credit are available for reallocation to such Cate-gory, the Association may, by notice to the Borrower,adjust the percentage then applicable to such expendituresin order that further withdrawals under such Categorymay continue until all expenditures thereunder shall havebeen made.

6. Notwithstanding the allocation of an amount of theCredit set forth in the second column of the table in para-graph 1 above, if any contract for the procurement of anyitem included in any Category shall have been awardedaccording to procedures inconsistent with those set forthor referred to in Schedule 3 of this Agreement, or if theAssociation shall have reasonably objected to any suchcontract on the ground that the procurement procedure fol-lowed is inconsistent with the procedures set forth or re-ferred to in such Schedule 3 or if the terms and conditionsof any such contract shall, without the Association's priorconcurrence, materially differ from those on the basis ofwhich bids were asked, the Association may, by notice tothe Borrower, cancel such amount of the Credit and cor-respondingly reduce the amount allocated to the relevantCategory, as the Association shall reasonably determine torepresent the portion of total expenditures under such con-tract which would have been eligible for financing out ofthe proceeds of the Credit, had the procurement proce-dures followed not been inconsistent with those set forthor referred to in such Schedule.

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SCHEDULE 2

Description of the Project

The Project, which is part of a lending program for agri-cultural development in Tamil Nadu, consists of:

A. A two and one-half year program to finance invest-ments in minor irrigation, land levelling, land drainageand improvement and farm mechanization for Beneficiariesthrough Primary Banks and Participating Banks, whichloans will be refinanced in accordance with the terms -andconditions of Schedule 5 of this Agreement and with theProject Agreement.

B. The provision of spare parts for tractors.

C. The provision of well-drilling equipment and earth-moving machinery.

D. The services of consultants for the purposes of (1)-' advising the State Groundwater Directorate and (2) carry-

ing out an aerial survey of crystalline areas of Tamil Nadu,Andhra Pradesh, Maharashtra and Mysore.

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SCHEDULE 3

Procurement Procedures

The Borrower will establish a special committee (herein-after called the Committee) for the purpose of directingthe procurement of goods under the Project. The Committeeshall consist of representatives of the Borrower (one ofwhom shall be the chairman), the Government of TamilNadu and ARC.

Under the Committee's directions, Tamil Nadu will or-ganize procurement of equipment eligible for financing outof the proceeds of the Credit in accordance with the follow-ing procedures:

1. Tractors and Spare Parts for tractors

(a) Tamil Nadu will obtain quotations for lots of atleast 500 tractors in order to import about 1500 tractors.Quotations will be sought by public invitation, on unitprices at varying quantities, from those suppliers in Bankmember countries and Switzerland who have establishedtractor manufacturing facilities in India, or have obtainednecessary approvals of the Borrower for the manufactureof tractors in India, prior to the date on which quotationsare sought. Before bids are invited the Committee will fur-nish to the Association, for its comments, the text of theinvitations to bid, the specifications and other bidding docu-ments, together with a description of the advertising pro-cedures and coverage to be followed for the bidding, andshall make such modifications in the said documents orprocedures as the Association may reasonably request.

(b) Tamil Nadu will require all suppliers submittingquotations to give full particulars as to proposed pre-salesand after-sales service arrangements, including provisionfor initial spare parts equal to 15% of the c.i.f. price oftractors supplied. Any supplier not providing satisfactoryassurances as to service arrangements would be disquali-fled by the Committee.

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(c) Tamil Nadu will advertise through LDB and theParticipating Banks the quoted prices and the service ar-rangements offered by the different suppliers. Beneficiarieswill be required to state to the Primary Bank or the Par-ticipating Bank for transmittal to Tamil Nadu, theirchoices, in order of preference, of, and at the same timeapply for an Agricultural Loan for, tractors which theywill be willing to buy. Loan applications will be processedin accordance with the provisions of Schedule 1 to theProject Agreement.

(d) Tamil Nadu will aggregate the orders received, ac-cording to first tractor choices. If the aggregate ordersfor the particular model come to below the minimum ac-ceptable order for that manufacturer at the unit pricesquoted for varying quantities, the Co-amittee will discardthe first choice for those farmers and proceed on the basisof second or other choices. After approval by the Commit-tee, Tamil Nadu will send to the Association its analysisof bids, including a statement of farmers' choices, and itsrecommendations before orders are placed. The Associa-tion shall promptly inform the Committee whether it hasany objections to the intended placement of orders andshall state the reasons for any objections it may have.

(e) Tamil Nadu will subsequently place orders with theselected suppliers at the unit prices quoted. Tamil Nadualso will enter into contracts with the selected suppliersor their agents which would specify service arrangementsand performance assurances including the supply of spareparts. Agents representing suppliers will be required tosell post-warranty service.

(f) Tamil Nadu will arrange through the suppliers' rep-resentatives in India for the imp,ortation and transporta-tion to Tamil Nadu of tractors. Tamil Nadu will arrangefor the distribution of tractors to agents designated by thesuppliers who would perform pre-sales services iand sellthe tractors to Beneficiaries. Tamil Nadu may charge agentsa fee for its services.

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(g) Suppliers will be required to maintain stocks ofspare parts referred to under paragraph 1(b) of this Sched-ule by a designated representative in a central store to bereleased through agents for tractors imported under theProject.

2. Well-Drilling Equipment and Earth-Moving Machinery

Well-drilling equipment and earth-moving machinery willbe procured on the basis 'of international competitive bid-ding, in accordance with the Guidelines for Procurementunder World Bank Loans and IDA Credits, published bythe Bank in August 1969, through arrangements to be estab-lished by the Committee, and will ensure that private con-tractors providing well-drilling custom services are offeredabout one-quarter of the well-drilling equipment for pur-chase.

3. For the purpose of evaluating bids for goods and asso-ciated services included in Category V of the table set outin paragraph 1 of Schedule 1 to this Agreement, bid pricesshall be determined and compared in accordance with thefollowing rules:

(a) The term "Local Bid" means a bid submitted by amanufacturer established in the territories of the Bor-rower for goods manufactured or processed to a substantialextent (as reasonably determined by the Association) insuch territories; any other bid shall be deemed to be a"Foreign Bid".

(b) The bid price under a Local Bid shall be the sum ofthe following amounts:

(i) the ex-factory price of such goods; and(ii) inland freight, insurance and other costs of delivery

of such goods to the place of their use or installa-tion.

(c) For the purpose of comparing any Foreign Bid withany Local Bid, the bid price under a Foreign Bid shall bethe -sum of the following amounts:

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(i) the c.i.f. price of such goods;

(ii) the amount of any taxes on the importation of suchgoods into the territories of the Borrower whichgenerally apply to non-exempt importers, or 15oof the amount specified in (i) above, whichever shallbe the lower; and

(iii) handling costs, inland freight, insurance and othercosts of delivery of such goods to the place of theiruse or installation.

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SCHEDULE 4

Equipment Required for the Project,

1. Tractors in the 25-60 hp range and spare parts for suchtractors.

2. Tractor Implements: mouldboard ploughs, disc ploughs,cultivators, disc harrows, cage wheels, levelling bladesand trailers.

3. Well-drilling equipment, spare parts for well-drillingequipment and earth-moving machinery: rotary rigs,hammer drills, mud pumps, hammers, compressors,graders, scrapers, tractors, bulldozers.

4. Pumps, engines, electric motors, electric connections,lining of open wells, tubes for tubewells.

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SCHEDULE 5

Principal Terms of Relending Agreements

The following sets forth the principal terms and condi-tions under which part of the proceeds of the Credit or theequivalent thereof shall be lent to ARC by the Borrower:

(a) In respect of ARC refinancing not exceeding 9 years:

(i) interest rate of 5% per amum less 1/4% perannum for prompt payment;

(ii) repayment at the end of 9 years;

(iii) exchange risk: for account of India.

(b) In respect of ARC refinancing for 10 years and abovebut not exceeding 15 years:

(i) interest rate of 51/% per annum less 1/4% perannum for prompt payment;

(ii) repayment at the end of 15 years;

(iii) exchange risk: for account of India.