OFFICIAL DOCUMENTS LOAN NUMBER 8795-IN Project Agreement (Tamil Nadu Rural Transformation Project) between INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT and STATE OF TAMIL NADU LOAN NUMBER 8795-IN PROJECT AGREEMENT Agreement entered into between INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT ("Bank") and STATE OF TAMIL NADU ("Project Implementing Entity") ("Project Agreement") in connection with the Loan Agreement ("Loan Agreement") of the Signature Date. The Bank and the Project Implementing Entity hereby agree as follows: ARTICLE I - GENERAL CONDITIONS; DEFINITIONS 1.01. The General Conditions (as defined in the Appendix to the Loan Agreement) apply to and form part of this Agreement. 1.02. Unless the context requires otherwise, the capitalized terms used in this Agreement have the meanings ascribed to them in the Loan Agreement or the General Conditions. ARTICLE H - PROJECT 2.01. The Project Implementing Entity declares its commitment to the objectives of the Project. To this end, the Project Implementing Entity shall carry out the Project through the Tamil Nadu Rural Transformation Society (TNRTS), in accordance with the provisions of Article V of the General Conditions and the Schedule to this Agreement, and shall provide, promptly as needed, the funds, facilities, services and other resources required for the Project ARTICLE HI- REPRESENTATIVE; ADDRESSES 3.01. The Project Implementing Entity's Representative is Chief Secretary, Government of Tamil Nadu. 3.02. For the purposes of Section 10.01 of the General Conditions: (a) the Bank's address is: International Bank for Reconstruction and Development 1818 H Street, N.W. Washington, D.C. 20433 United States of America; and -2- (b) the Bank's Electronic Address is: Facsimile: E-mail: 1-202-477-6391 jahmad@worldbankorg 3.03. For the purposes of Section 10.01 of the General Conditions: (a) the Project Implementing Entity's address is: Office of Chief Secretary to Government of Tamil Nadu 2nd Floor, Old Building, Secretariat St. George fort Chennai-600009, Tarnil Nadu; and (b) the Project Implementing Entity's Electronic Address is: Facsimile: E-mail: +91-44-25672304 cs@tn.gov.in -3- AGREED, as of the latest of the two dates written below. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT Byy _ _ Authorized Representative Name: J&mAtA* AIA- AP,mfA Title: ^WArrt AlleCM /Ab'A Date: ANVA3Y 3O,2701- STATE OF TAMIL NADU By A thorized Representative Name: /~6deN AIA1A Title: -4- SCHEDULE Execution of the Project Section L Implementation Arrangements A. Institutional Arrangements The Project Implementing Entity shall vest the overall responsibility for the implementation of the Project activities in TNRTS. To this end, the Project Implementing Entity, shall: (a) Not later than the Effective Date, through the Department of Rural Development and Panchayati Raj, establish and thereafter maintain, throughout the period of Project implementation, a high level Steering Committee, with functions, composition and responsibilities acceptable to the Bank, including, inter alia- (i) providing strategic guidance to TNRTS on Project implementation; (ii) providing oversight over the Matching Grants implementation; and (iii) reviewing and monitoring TNRTS's carrying out of the Project and promoting the Project integration with regular Tamil Nadu's programs and schemes. (b) Maintain, throughout the period of Project implementation, a governing body and executive committee (GB & EC), with functions, composition and responsibilities acceptable to the Bank, including, inter alia: (i) directing the day to day operations of the TNRTS and providing guidance on policy level discussions; and (ii) consulting the Advisory Committee on policy and implementation related matters. (c) Not later than six (6) months after the Effective Date, establish and thereafter maintain, throughout the period of Project implementation, an Advisory Committee, with functions, composition and responsibilities acceptable to the Bank, including, inter alia: (i) providing strategic advice to the GB & EC on the implementation of the Project; and (ii) providing a networking platform to showcase to the external stakeholders and build partnerships when required. (d) Not later than the Effective Date, establish and maintain, throughout the period of Project implementation, a SPMU within the TNRTS, assisted by adequate professional and administrative staff in numbers, with qualifications and experience, and under terms of reference agreed with the Bank and set forth in the Project Implementation Plan; which unit shall be vested with such powers, budget and functions as shall be required to: inter alia: (i) carry out the day-to-day implementation of Project activities, performing procurement and financial management functions and liaising -5- with the DPMUs and the Fund Manager; (ii) monitor and evaluate, on a regular basis, the compliance of the PFIs with the eligibility criteria set out in the Project Implementation Plan; (iii) monitor the performance of the underlying loan portfolio including collecting reports on the Matching Grants, and where necessary, conduct prior review of the Matching Grants applications; (iv) monitor the progress of activities supported by DPMUs; (v) ensure the timely collection of the audited reports of the PFIs; (vi) manage the implementation of the technical assistance program for the PFIs; (vii) ensure the technical review of applications for Matching Grants; and (viii) ensure the Project's adherence to/compliance with the Safeguard Documents. 2. Prior to the carrying out of the Project activities in any given District, the Project Implementing Entity shall: (a) Establish a District Society in such District, in form and substance satisfactory to the Bank. (b) Enter into a legal agreement with such District Society, on terms and conditions acceptable to the Bank, ("District Participating Agreement") setting up the rules and procedures governing their collaboration, and describing each party's roles and responsibilities in the implementation of Project activities at the District level and at the Block level. (c) The District Society shall: (i) establish in accordance with the schedule indicated in the District Participating Agreement, and maintain throughout the period of the Project Implementation, a District Project Management Unit (DPMU), with functions, composition and responsibilities acceptable to the Bank, including: resolving cross-cutting implementation issues, maximizing convergence of complementary activities, and monitoring the implementation of Project activities at the District level; and (ii) establish, in accordance with the schedule indicated in the District Participating Agreement, and maintain, throughout the period of the Project Implementation, such number of Block Project Management Units (BPMUs), as needed, with functions, composition and responsibilities acceptable to the Bank, including: supporting the CPs at the Block and village level, carrying out value-chain strengthening activities, training activities for enterprises, and monitoring the implementation of Project activities at the Block level. -6- B. Project Implementation Plan and other Documents The Project Implementing Entity shall, through TNRTS: (a) implement the Project in accordance with the Project Implementation Plan, the Matching Grants Manual, the FM Manual, the HR Manual, and the Procurement Manual; provided, however, that in the event of conflict between the provisions of any of said documents and manuals, on the one hand, and those of this Agreement or the Loan Agreement, on the other hand, the provisions of the latter shall prevail; and (b) refrain from amending, suspending, waiving, and/or voiding any provision of the Project Implementation Plan, the Matching Grants Manual, the FM Manual, the HR Manual, and the Procurement Manual, whether in whole or in part, without the prior written concurrence of the Bank. C. Safeguards 1 . The Project Implementing Entity shall, through TNRTS: (a) ensure, and cause the Beneficiaries to ensure, that the Project (including any activities carried out under the Start-Up Fund Grants and the Matching Grants) is implemented in accordance with the ESMF, the TDP, and any other instruments to be prepared pursuant to paragraph 2 below, (collectively, referred to as the "Safeguard Documents"); all in accordance with the objectives, policies, procedures, time schedules and other provisions set forth in the Safeguard Documents; and (b) refrain from taking any action which would prevent or interfere with the implementation of the Safeguard Documents, including any amendment, suspension, waiver, and/or voidance of any provision of the Safeguard Documents, whether in whole or in part, without the prior written concurrence of the Bank. 2. The Project Implementing Entity, through TNRTS, shall ensure that, prior to: (i) the selecting of any Business Plan or proposals for financing under the Start-Up Fund Grants and/or Matching Grants; (ii) tendering for any bids for civil works; or (iii) requesting expression of interest for the provision of technical services under the Project: (a) an environmental and social screening/assessment shall have been carried out of said proposed Business Plans, civil works, technical services, as the case may be pursuant to the provisions of the ESMF; and (b) the respective follow- up actions have been taken and/or additional instruments, if needed, have been produced, approved, and disclosed in local language(s) at the relevant Project sites, in accordance with the ESMF. -7- 3. The Project Implementing Entity shall, through TNRTS, ensure, and cause the Beneficiaries to ensure, that no activity under the Project (including any activities carried out under the Start-Up Fund Grants and the Matching Grants) shall require the involuntary acquisition of land or give rise to Displaced Persons. 4. The Project Implementing Entity shall, through TNRTS, ensure, and cause the Beneficiaries to ensure, that: (a) any land required for the Project (including any activities carried out under the Start-Up Fund Grants and the Matching Grants) shall be procured on a willing-buyer/willing-seller basis or obtained as a voluntary donation/bequest, or any other voluntary means duty documented; and (b) any expenditures associate with such acquisition be financed exclusively out of the TNRTS's or the Beneficiaries' own resources, as the case may be. 5. The Project Implementing Entity, through TNRTS, shall ensure, and cause the Beneficiaries to ensure, that, prior to commencing any activities under the Project, and/or the respective Business Plans: (a) all necessary governmental permits and clearances for such activities shall have been obtained from the competent governmental authoritylies; and (b) all pre-conditions imposed by the governmental authority/ies under such permit(s) or clearance(s) shall have been complied with/fulfilled. 6. The Project Implementing Entity, through TNRTS, shall ensure, and cause the Beneficiaries to ensure, that each contract for civil works under the Project (including the Start-Up Fund Grants and Matching Grants) include the obligation of the relevant contractor to comply with the relevant Safeguard Documents applicable to said civil works. 7. In the event of any conflict between the provisions of any of the Safeguard Documents, on the one hand, and the provisions of the Loan Agreement and this Agreement, on the other hand, the provisions of the latter shall prevail. D. Start-Up Fund Grants 1I For purposes of implementing Component 1(c)(iii) of the Project, the Project Implementing Entity through TNRTS, shall ensure that Start-Up Fund Grants are made exclusively to PCs, EGs, and PGs, in accordance with the eligibility criteria and procedures detailed in the Project Implementation Plan. 2. The Project Implementing Entity, through TNRTS, shall: (a) make available the format(s) of the Business Plan to the potential Beneficiary(ies) in accordance with the criteria set forth in the Project Implementation Plan. -8- (b) upon the approval of the Business Plan by the DPMU or the SPMU as the case may be, enter into a Start-Up Fund Grant Agreement with the respective Beneficiary under terms and conditions set forth in the Project Implementation Plan. (c) cause the release of funds by the DPMU/SPMU to the Beneficiaries in a timely manner. 3. The Project Implementing Entity through TNRTS, shall ensure that the Start-Up Fund Grant Agreement, shall contain terms adequate to protect the interests of the Borrower and the Bank, including: (a) the requirement that all activities financed by a Start-Up Fund Grant, be carried out in accordance with the Project Implementation Plan, with due diligence and efficiency and in accordance with sound technical, financial, social, environmental and managerial standards, including the "Guidelines on Preventing and Combating Fraud and Corruption in Projects Financed by IBRD Loans and IDA Credits and Grants", dated October 15, 2006 and revised in January 2011 and as of July 1, 2016", and the Safeguard Documents, and that adequate records to reflect the financing, operations, resources and utilization of the funds be maintained; (b) ensure that the Start-Up Fund Grant Agreements contain a detailed list of the eligible expenditures that can be financed through the Start-Up Fund Grant(s); (c) require the Beneficiary to: (i) establish and/or maintain policies and procedures that would allow TNRTS, Prject Implementing Entity, and/or the Bank to carry out supervision and monitor the implementation of the activities; (ii) prepare and furnish to TNRTS, Project Implementing Entity, and/or the Bank, all such information that the TNRTS, Project Implementing Entity, and/or the Bank shall reasonably request in relation to the Start-Up Fund Grant; and (iii) accept random and/or unannounced physical or documentary inspections by TNRTS, Project Implementing Entity, and/or the Bank for the monitoring of, and in relation to, the carrying out of the activities financed under the Start-Up Fund Grant; (d) the right of the TNRTS to suspend or terminate the right of the Beneficiary to use the proceeds of the Start-Up Fund Grant upon failure by the Beneficiary to perform any of its obligations under the Start-Up Fund Agreement(s); and (e) each Beneficiary shall consent to the Project Implementing Entity's right of restitution of any amounts of the Start-Up Fund Grant disbursed under the Start-Up Fund Grant Agreement with respect to which fraud and -9- corruption has occurred, or with which an ineligible expenditure has been paid. E. Matching Grants for Producer Collectives and Enterprises 1 . The Project Implementing Entity through TNRTS, shall: (a) For purposes of implementing Component 2. (a) (i) of the Project: (i) invite, screen and pre-select, pursuant to the criteria, rules and procedures of the Project Implementation Plan and the Matching Grants Manual, eligible PFis to participate as co-financiers for the financing of Business Plans; and (ii) cause the Fund Manager to enter into written co-financing cooperation agreements (the "Co-Financing Cooperation Agreements") with such PFIs, on terms and conditions endorsed by TNRTS and acceptable to the Bank. (b) Ensure that Matching Grants are made available to collective organizations, EGs, NMSEs pursuant to the eligibility criteria and procedures detailed in the Matching Grants Manual along with the Project Implementation Plan. (c) Ensure that only Business Plans screened and pre-selected by the PFIs be submitted by the PFIs to the Fund Manager for DPMU's and/or SPMU's endorsement (depending on the loan ceilings stipulated in the Matching Grants Manual) as per the Project Implementation Plan and the Matching Grants Manual. 2. Prior to the transfer of any amount to a PFI by TNRTS, on account of a Matching Grant for an approved Business Plan, TNRTS shall ensure that such PFI has entered into a legal agreement with the Beneficiary (the PFI Loan Agreement) for the provision of the PFI Loan, under terms and condition acceptable to TNRTS and the Bank, which agreement shall provide, inter alia, that: (a) the requirement that all activities financed by the Matching Grants be carried out in accordance with the Project Implementation Plan, and the Matching Grants Manual, with due diligence and efficiency and in accordance with sound technical, financial, social, environmental and managerial standards, including the "Guidelines on Preventing and Combating Fraud and Corruption in Projects Financed by IBRD Loans and IDA Credits and Grants", dated October 15, 2006 and revised in January 2011 and as of July 1, 2016", and the Safeguard Documents, and that adequate records to reflect the financing, operations, resources and utilization of the funds be maintained; - 10 - (b) each Beneficiary shall: (A) establish and/or maintain policies and procedures that would allow TNRTS, the Fund Manager, the Borrower, and/or the Bank to carry out supervision and monitor the implementation of the activities; (B) prepare and furnish to the Project Implementing Entity, the Fund Manager, the Borrower, and/or the Bank, all such information that the Project Implementing Entity, the Fund Manager, the Borrower, and/or the Bank shall reasonably request in relation to the Matching Grant; and (C) accept random and/or unannounced physical or documentary inspections by the Project Implementing Entity, the Borrower, and/or the Bank for the monitoring of, and in relation to, the carrying out of the activities financed under the Matching Grant; (c) the PFI shall have the right to suspend or terminate the right of a Beneficiary to withdraw and use the proceeds of the Matching Grant in the following circumstances: (i) upon any failure of the Beneficiary to perform its obligations in accordance with respect to the PFI loan; or (ii) upon the Bank declaring the Beneficiary ineligible; (d) each Beneficiary shall consent to the Project Implementing Entity's right of restitution of any amounts of the Matching Grant disbursed under the PFI Loan with respect to which fraud and corruption has occurred, or with which an ineligible expenditure has been paid, and (e) in case of full repayment of the repayable portion of the PF Loan (the 70/) by the Beneficiary(ies), the Matching Grant portion (30%), will be waived off. In cases when it is decided, with the concurrence of the Bank that because of the default of a Beneficiary of a payment of the PFI Loan, the entire Matching Grant becomes a repayable loan; the interest of said loan (which shall be retained by the PFI), shall be retroactively accrued from the day as specified in the Matching Grant Manual. 2. Any amounts of the Matching Grants recovered by the PFIs and their respective interest, shall be returned by the PFIs to the TNRTS and utilized as per the provisions in the Matching Grants Manual. F. Fund Manager (a) No later than three (3) months after the Effective Date, the Project Implementing Entity, through TNRTS, shall hire a Fund Manager with experience and qualifications, and under terms of reference acceptable to the Bank; (b) the Project Implementing Entity, through TNRTS, shall ensure that Fund Manager is responsible for: (i) reviewing pre-approved loan applications submitted by the PFIs on behalf of potential Beneficiaries of Matching - 11 - Grants; (ii) transferring the funds to the PFIs for selected Beneficiaries awarded with Matching Grants; (iii) submitting periodic reports to the SPMU on the utilization of Matching Grant funds; and (iv) making decisions relating to the recovery of the Matching Grants funds. Section II. Project Monitorine. Reportine and Evaluation A. Project Reports 1. The Project Implementing Entity, shall monitor and evaluate the progress of the Project and cause TNRTS to prepare Project Reports for the Project in accordance with the provisions of Section 5.08 (b) of the General Conditions and on the basis of indicators acceptable to the Bank. Each such Project Report shall cover the period of one calendar semester, and shall be furnished to the Borrower not later than forty-five (45) days after the end of the period covered by such report. 2. The Project Implementing Entity shall and/or shall cause TNRTS to prepare the Project execution and completion report referred to in Section 5.08 (c) of the General Conditions; and furnish it to the Borrower and the Bank no later than six (6) months after the Closing Date.