Page  1
CONFORMED COPY
CREDIT NUMBER 3242 IN
Development Credit Agreement
(Second National HIV/AIDS Control Project)
between
INDIA
and
INTERNATIONAL DEVELOPMENT ASSOCIATION
Dated September 14, 1999
CREDIT NUMBER 3242 IN 
DEVELOPMENT CREDIT AGREEMENT
AGREEMENT, dated September 14, 1999, between INDIA, acting by its President (the 
Borrower), and the INTERNATIONAL DEVELOPMENT ASSOCIATION (the Association).
WHEREAS (A) the Association has received a letter dated May 7, 1999 from the 
Borrower, describing the policies, approaches and implementation of the National 
HIV/AIDS Control Program (as hereinafter defined) and declaring the Borrower’s 
commitment to carry out such Program (the National Policy Letter);
(B) 
the Borrower, having satisfied itself as to the feasibility and priority 
of the project described in Schedule 2 to this Agreement (the Project), has requested 
the Association to assist in the financing of the Project;
(C)
certain activities under the Project will be carried out by certain 
States and Union Territories of the Borrower, certain municipal corporations or other 
municipal authorities within States or Union Territories of the Borrower, and their 
respective Implementation Societies (as hereinafter defined) with the Borrower’s 
assistance and, as part of such assistance, the Borrower will make part of the 
proceeds of the credit provided for in Article II of this Agreement (the Credit) 
available to such Implementation Societies as set forth in this Agreement; and 
WHEREAS the Association has agreed, on the basis, inter alia, of the foregoing, 
to extend the Credit to the Borrower upon the terms and conditions set forth in this 
Agreement;
NOW THEREFORE the parties hereto hereby agree as follows:
ARTICLE I
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General Conditions; Definitions
Section 1.01. The “General Conditions Applicable to Development Credit 
Agreements” of the Association, dated January 1, 1985 (as amended through \0bDecember 2, 
1997), with the modifications set forth below (the General Conditions) constitute an 
integral part of this Agreement:
(a)
A new paragraph (12) is added to Section 2.01 to read as set forth below, 
and the existing paragraphs (12) through (14) of said Section are accordingly 
renumbered as paragraphs (13) through (15):
“12.
‘Participating Country’ means any country that the Association 
determines 
meets the requirements set forth in Section 10 of Resolution No. 
183 of the Board of 
Governors of the Association, adopted on \0bJune 26, 
1996; and ‘Participating Countries’ 
means, collectively, all such 
countries.”
(b)
The second sentence of Section 5.01 is modified to read as follows:
“Except as the Borrower and the Association shall otherwise agree, no 
withdrawals 
shall be made: (a) on account of expenditures in the territories 
of any country which is not 
a Participating Country or for goods produced in, or 
services supplied from, such 
territories; or (b) for the purpose of 
any payment to persons or entities, or for any import 
of goods, if such payment 
or import, to the knowledge of the Association, is prohibited by a 
decision of 
the United Nations Security Council taken under Chapter VII of the Charter of 
the 
United Nations.”
Section 1.02. Unless the context otherwise requires, the several terms defined 
in the General Conditions and in the Preamble to this Agreement have the respective 
meanings therein set forth and the following additional terms have the following 
meanings:
(a)
“AIDS” means Acquired Immunodeficiency Syndrome, a severe life 
threatening condition which represents the late clinical stage of infection with HIV 
(as hereinafter defined);
(b)
“CBO” means a community-based organization;
(c)
“Eligible Categories” means categories (1), (2), (3), (4) and (5) set 
forth in the table in Part A.1 of Schedule 1 to this Agreement;
(d)
“Eligible Expenditures” means the expenditures for goods and services 
referred to in Section 2.02 of this Agreement;
(e)
“First National Aids Control Project” means the National Aids Control 
Project (Cr. 2350-IN) financed by the Association;
(f)
“Fiscal Year” and “FY” mean the fiscal year of the Borrower, each Project 
State (as hereinafter defined) and each Implementation Society (as hereinafter 
defined), which begins on April 1 of a calendar year and ends on March 31 of the 
following calendar year;
(g)
“HIV” means Human Immunodeficiency Virus;
(h)
“IEC” means information, education and communication;
(i)
“Implementation Society” means each society established and registered 
within each Project State under the applicable Societies Registration Act, as amended, 
and responsible for, inter alia, carrying out the Project at the state or municipal 
level, as applicable;
(j)
“Memorandum of Understanding” means each Memorandum of Understanding to 
be executed by the Borrower, each Project State and its Implementation Society and 
furnished to the Association pursuant to Section 3.01(c) of this Agreement;
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(k)
“MOHFW” means the Ministry of Health and Family Welfare of the Borrower;
(l)
“NACO” means National AIDS Control Organization established within MOHFW 
and responsible for, inter alia, carrying out the Project at the national level;
(m)
“National HIV/AIDS Control Program” means the Second Phase of the 
National HIV/AIDS Control Program of the Borrower, as described in the National Policy 
Letter (as hereinafter defined);
(n)
“National Policy Letter” means the letter dated May 7, 1999 from the 
Borrower to the Association describing the policies, approaches and implementation of 
the National HIV/AIDS Control Program and declaring the Borrower’s commitment to carry 
out such Program;
(o)
“National Program Review” means an annual review of the overall 
implementation of the National HIV/AIDS Control Program to be conducted under the 
National AIDS Control Board of the Borrower;
(p)
“NGO” means a non-governmental organization;
(q)
“OI” means opportunistic infection;
(r)
“Performance and Expenditure Annual Review” means an annual review of the 
implementation of the Project to be conducted by NACO and the Association;
(s)
“Project Implementation Plan” means each of (i) the Project 
Implementation Plan of the Borrower dated May 1999 and (ii) the Project Implementation 
Plans of the Project States and their Implementation Societies for the carrying out of 
their respective portions of the Project, approved by the Association, as the same may 
be updated from time to time with the agreement of the Association;
(t)
“Project Management Report” means each report prepared in accordance with 
Section 4.02 of this Agreement;
(u)
“Project State” means (i) each State or Union Territory of the Borrower 
and (ii) each municipal corporation or other municipal authority within a State or 
Union Territory of the Borrower, or any successor thereto, which participates in the 
carrying out of the Project;
(v)
“Special Account” means the account referred to in Part B of Schedule 1 
to this Agreement;
(w)
“STI” means sexually transmitted infection; and
(x)
“TRG” means a technical resource group.
Section 1.03. Each reference in the General Conditions to the Project 
implementation entity shall be deemed to be a reference to each Project State and its 
Implementation Society.
ARTICLE II
The Credit
Section 2.01. The Association agrees to lend to the Borrower, on the terms and 
conditions set forth or referred to in the Development Credit Agreement, an amount in 
various currencies equivalent to one hundred forty million eight hundred twenty 
thousand Special Drawing Rights (SDR 140,820,000).
Section 2.02. The amount of the Credit may be withdrawn from the Credit Account 
in accordance with the provisions of Schedule 1 to this Agreement for expenditures 
made (or, if the Association shall so agree, to be made) in respect of the reasonable 
cost of goods and services required for the Project and to be financed out of the 
proceeds of the Credit.
Section 2.03. The Closing Date shall be July 31, 2004 or such later date as the 
Association shall establish.  The Association shall promptly notify the Borrower of 
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such later date.
Section 2.04. (a) The Borrower shall pay to the Association a commitment charge 
on the principal amount of the Credit not withdrawn from time to time at a rate to be 
set by the Association as of June 30 of each year, but not to exceed the rate of 
one-half of one percent (1/2 of 1%) per annum.
(b)
The commitment charge shall accrue: (i) from the date sixty days after 
the date of this Agreement (the accrual date) to the respective dates on which amounts 
shall be withdrawn by the Borrower from the Credit Account or canceled; and (ii) at 
the rate set as of the June 30 immediately preceding the accrual date and at such 
other rates as may be set from time to time thereafter pursuant to paragraph (a) 
above.  The rate set as of June 30 in each year shall be applied from the next date in 
that year specified in Section 2.06 of this Agreement.
(c)
The commitment charge shall be paid: (i) at such places as the 
Association shall reasonably request; (ii) without restrictions of any kind imposed 
by, or in the territory of, the Borrower; and (iii) in the currency specified in this 
Agreement for the purposes of Section 4.02 of the General Conditions or in such other 
eligible currency or currencies as may from time to time be designated or selected 
pursuant to the provisions of that Section.
Section 2.05. The Borrower shall pay to the Association a service charge at the 
rate of three-fourths of one percent (3/4 of 1%) per annum on the principal amount of 
the Credit withdrawn and outstanding from time to time.
Section 2.06. Commitment charges and service charges shall be payable 
semiannually on December 1 and June 1 in each year.
Section 2.07. (a)  Subject to paragraphs (b), (c) and (d) below, the Borrower 
shall repay the principal amount of the Credit in semiannual installments payable on 
each December 1 and June 1 commencing December 1, 2009 and ending June 1, 2034.  Each 
installment to and including the installment payable on June 1, 2019 shall be one and 
one-fourth percent (1-1/4%) of such principal amount, and each installment thereafter 
shall be two and one-half percent (2-1/2%) of such principal amount.
(b)
Whenever: (i) the Borrower’s per capita gross national product (GNP), as 
determined by the Association, shall have exceeded for three consecutive years the 
level established annually by the Association for determining eligibility to access 
the Association’s resources; and (ii) the Bank shall consider the Borrower 
creditworthy for Bank lending, the Association may, subsequent to the review and 
approval thereof by the Executive Directors of the Association and after due 
consideration by them of the development of the Borrower’s economy, modify the 
repayment of installments under paragraph (a) above by: (A) requiring the Borrower to 
repay twice the amount of each such installment not yet due until the principal amount 
of the Credit shall have been repaid; and (B) requiring the Borrower to commence 
repayment of the principal amount of the Credit as of the first semiannual payment 
date referred to in paragraph (a) above falling six months or more after the date on 
which the Association notifies the Borrower that the events set out in this paragraph 
(b) have occurred, provided, however, that there shall be a grace period of a minimum 
of five years on such repayment of principal.
(c)
If so requested by the Borrower, the Association may revise the 
modification referred to in paragraph (b) above to include, in lieu of some or all of 
the increase in the amounts of such installments, the payment of interest at an annual 
rate agreed with the Association on the principal amount of the Credit withdrawn and 
outstanding from time to time, provided that, in the judgment of the Association, such 
revision shall not change the grant element obtained under the above-mentioned 
repayment modification.
(d)
If, at any time after a modification of terms pursuant to paragraph (b) 
above, the Association determines that the Borrower’s economic condition has 
deteriorated significantly, the Association may, if so requested by the Borrower, 
further modify the terms of repayment to conform to the schedule of installments as 
provided in paragraph (a) above.
Section 2.08. The currency of the United States of America is hereby specified 
Page  5
for the purposes of Section 4.02 of the General Conditions.
ARTICLE III
Execution of the Project
Section 3.01. (a) The Borrower declares its commitment to the objectives of the 
Project, and, to this end, without any limitation or restriction upon any of its other 
obligations under this Agreement, shall carry out through NACO, and cause each Project 
State and its Implementation Society to carry out, the Project with due diligence and 
efficiency and in conformity with appropriate administrative, financial, ethical and 
public health practices and the National Policy Letter, and shall provide, and cause 
each Project State and its Implementation Society to provide, promptly as needed, the 
funds, facilities, services and other resources required for the Project.
(b)
Without limitation upon the provisions of paragraph (a) of this Section 
and except as the Borrower and the Association shall otherwise agree, the Borrower 
shall carry out, and cause each Project State and its Implementation Society to carry 
out, the Project in accordance with the Implementation Program set forth in Schedule 4 
to this Agreement.
(c)
Without any limitation or restriction upon any of its other obligations 
under this Agreement, the Borrower shall execute with each Project State and its 
Implementation Society a Memorandum of Understanding, satisfactory to the Association 
and substantially in the form set forth in Schedule 5 to this Agreement, and promptly 
upon such execution furnish a copy thereof to the Association, before such Project 
State and Implementation Society participates in the carrying out of any portion of 
the Project.
(d)
Without any limitation or restriction upon any of its other obligations 
under this Agreement, the Borrower shall cause each Project State and its 
Implementation Society to perform in accordance with the provisions of the applicable 
Memorandum of Understanding all the obligations of such Project State and 
Implementation Society therein set forth, shall take or cause to be taken all action, 
including the provision of funds, facilities, services and other resources, necessary 
or appropriate to enable such Project State and Implementation Society to perform such 
obligations, and shall not take or permit to be taken any action which would prevent 
or interfere with such performance.
(e)
The Borrower shall make available to each Implementation Society, as a 
grant and at least on an annual basis in a timely manner, part of the proceeds of the 
Credit and additional funds from the Borrower’s own resources, in amounts sufficient 
to cover the amounts required by such Implementation Society in carrying out its 
portion of the Project.
Section 3.02. Except as the Association shall otherwise agree, procurement of 
the goods, works and consultants’ services required for the Project and to be financed 
out of the proceeds of the Credit shall be governed by the provisions of Schedule 3 to 
this Agreement.
Section 3.03. For the purposes of Section 9.06 of the General Conditions and 
without limitation thereto, the Borrower shall:
(a)
prepare, on the basis of guidelines acceptable to the Association, and 
furnish to the Association not later than six (6) months after the Closing Date or 
such later date as may be agreed for this purpose between the Borrower and the 
Association, a plan designed to ensure the continued achievement of the Project’s 
objectives; and
(b)
afford the Association a reasonable opportunity to exchange views with 
the Borrower on said plan.
Section 3.04. The Borrower and the Association hereby agree that the obligations 
set forth in Sections 9.03, 9.04, 9.05, 9.06, 9.07 and 9.08 of the General Conditions 
(relating to insurance, use of goods and services, plans and schedules, records and 
reports, maintenance and land acquisition, respectively) in respect of the activities 
to be carried out by each Project State and its Implementation Society shall be 
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carried out by such Project State and Implementation Society pursuant to their 
Memorandum of Understanding.
ARTICLE IV
Financial Covenants
Section 4.01. (a) The Borrower shall, and shall cause each Project State and its 
Implementation Society to, maintain a financial management system, including records 
and accounts, and prepare financial statements in a format acceptable to the 
Association, adequate to reflect in accordance with sound financial management and 
accounting practices the operations, resources and expenditures related to the Project 
of the departments or agencies of the Borrower and each Project State responsible for 
carrying out the Project or any part thereof and of each Implementation Society.
(b)
The Borrower shall, and shall cause each Project State and its 
Implementation Society to:
(i)
have the records, accounts and financial statements referred to in 
paragraph 
(a) of this Section (and, in the case of the Borrower, those 
for the Special 
Account) for each Fiscal Year audited, in accordance 
with appropriate auditing 
principles consistently applied, by 
independent auditors acceptable to the 
Association;
(ii)
furnish to the Association as soon as available, but in any case 
not later 
than six months after the end of each such Fiscal 
Year, (A) certified copies 
of the financial statements referred to 
in paragraph (a) of this Section for 
such Fiscal Year as so audited, 
and (B) an opinion on such financial 
statements, records and 
accounts and a report of such audit, by said auditors, 
of such scope 
and in such detail as the Association shall have reasonably 
requested; and
(iii)
furnish to the Association such other information concerning said 
records, 
accounts and financial statements, and the audit 
thereof, and concerning said 
auditors, as the Association may from 
time to time reasonably request.
(c)
For all expenditures with respect to which withdrawals from the Credit 
Account were made on the basis of Project Management Reports or statements of 
expenditure, the Borrower shall:
(i)
maintain or cause to be maintained, in accordance with paragraph 
(a) of this 
Section, records and separate accounts reflecting such 
expenditures;
(ii)
retain or cause to be retained, until at least one year after the 
Association 
has received the audit report for the Fiscal Year in which 
the last withdrawal 
from the Credit Account was made, all records 
(contracts, orders, invoices, 
bills, receipts and other documents) 
evidencing such expenditures;
(iii)
enable the Association’s representatives to examine such records; 
and
(iv)
ensure that such records and accounts are included in the annual 
audit 
referred to in paragraph (b) of this Section and that the 
report of such audit 
contains a separate opinion by said auditors 
as to whether the Project 
Management Reports or statements of 
expenditure submitted during such Fiscal 
Year, together with the 
procedures and internal controls involved in their 
preparation, 
can be relied upon to support the related withdrawals.
Section 4.02. (a) Without limitation upon the provisions of Section 4.01 of this 
Agreement, the Borrower shall carry out, and cause each Project State and its 
Implementation Society to carry out, a time-bound action plan acceptable to the 
Association for the strengthening of the financial management system referred to in 
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paragraph (a) of said Section 4.01 in order to enable the Borrower, not later than May 
15, 2000, or such later date as the Association shall agree, to prepare periodic 
consolidated Project Management Reports, acceptable to the Association, each of which:
(i)
(A) sets forth actual sources and applications of funds for the 
Project, both 
cumulatively and for the period covered by said 
report, and projected sources 
and applications of funds for the 
Project for the six-month period following 
the period covered by said 
report, and (B) shows separately expenditures 
financed out of the 
proceeds of the Credit during the period covered by said 
report and 
expenditures proposed to be financed out of the proceeds of the 
Credit during the six-month period following the period covered by said 
report;
(ii)
(A) describes progress in Project implementation, both 
cumulatively and for 
the period covered by said report, and (B) 
explains variances between the 
actual and previously forecast 
implementation targets; and
(iii)
sets forth the status of procurement under the Project and 
expenditures under 
contracts financed out of the proceeds of the Credit, 
as at the end of the 
period covered by said report.
(b)
Upon the completion of the action plan referred to in paragraph (a) of 
this Section, the Borrower shall prepare, in accordance with guidelines acceptable to 
the Association, and furnish to the Association not later than 45 days after the end 
of each period a Project Management Report for such period.
ARTICLE V
Remedies of the Association
Section 5.01. Pursuant to Section 6.02 (l) of the General Conditions, the 
following additional events are specified:
(a)
The Borrower or any Project State or Implementation Society shall have 
failed to perform any of its obligations under its Memorandum of Understanding.
(b)
As a result of events which have occurred after the date of this 
Agreement, an extraordinary situation shall have arisen which shall make it improbable 
that the Borrower or any Project State or Implementation Society will be able to 
perform its obligations under its Memorandum of Understanding.
(c)
The Borrower, any Project State or Implementation Society shall have 
waived or failed to enforce any of the provisions of any Memorandum of Understanding.
(d)
Any Memorandum of Understanding shall have been amended, suspended, 
abrogated or repealed without the prior written consent of the Association.
(e)
An event shall have occurred which shall make it improbable that the 
National HIV/AIDS Control Program, as further described in the National Policy Letter, 
or a significant part of such Program will be carried out.
Section 5.02. Pursuant to Section 7.01 (h) of the General Conditions, the 
following additional event is specified, namely, that any of the events specified in 
paragraphs (a), (c) and (d) of Section 5.01 of this Agreement shall occur and shall 
continue for a period of sixty (60) days after notice thereof shall have been given by 
the Association to the Borrower.
ARTICLE VI
Termination
Section 6.01. The date ninety (90) days after the date of this Agreement is 
hereby specified for the purposes of Section 12.04 of the General Conditions.
ARTICLE VII
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Representative of the Borrower; Addresses
Section 7.01. Any Secretary, Additional Secretary, Joint Secretary, Director, 
Deputy Secretary or Under Secretary of the Department of Economic Affairs in the 
Ministry of Finance of the Borrower is designated as representative of the Borrower 
for the purposes of Section 11.03 of the General Conditions.
Section 7.02. The following addresses are specified for the purposes of Section 
11.01 of the General Conditions:
For the Borrower:
Secretary to the Government of India
Department of Economic Affairs
Ministry of Finance
New Delhi, India
Cable address:
Telex:
ECOFAIRS
953-3166175
New Delhi
For the Association:
International Development Association
1818 H Street, N.W.
Washington, D.C. 20433
United States of America
Cable address:
Telex:
INDEVAS
248423 (MCI) or
Washington, D.C.
 64145 (MCI) 
IN WITNESS WHEREOF, the parties hereto, acting through their duly authorized 
representatives, have caused this Agreement to be signed in their respective names in 
New Delhi, India, as of the day and year first above written.
INDIA
By /s/ V. Govindarajan 
Authorized Representative
INTERNATIONAL DEVELOPMENT ASSOCIATION
By /s/ Edwin R. Lim 
Country Director, India
SCHEDULE 1
Withdrawal of the Proceeds of the Credit
A.
General
1.
The table below sets forth the Categories of items to be financed out of the 
proceeds of the Credit, the allocation of the amounts of the Credit to each Category 
Page  9
and the percentage of expenditures for items so to be financed in each Category:
Amount of the
Credit Allocated
   % of
(Expressed in
Expenditures
Category
SDR Equivalent)
to be Financed
(1)
Civil works
   2,120,000
80%
(2)
Furniture, bloodbank  
  31,890,000
100% of foreign
kits and other equipment,
expenditures; 100%
vehicles, lab and
of local expenditures
other supplies
(ex-factory cost); and
80% of local expendi-
tures for other items
procured locally
(3)
STI and OI Medicines
 
  16,940,000
90%
(4)
Training, workshops,
 
  72,480,000
100%
fellowships, IEC,
advertising and 
publicity, surveillance
and research, studies,
NGO and priority
interventions services,
consultant and 
professional services,
management information
and monitoring and
evaluation systems
(5)
Incremental operating
  7,130,000
70% through
and maintenance costs
July 31, 2000;
60% from 
August 1, 2000
through July 31,
2001; 50% from
August 1, 2001
through July 31,
2003; and 25%
thereafter
(6)
Unallocated
 10,260,000
       ___________
TOTAL
140,820,000
===========
2.
For the purposes of this Schedule:
(a)
the term “foreign expenditures” means expenditures in the currency of any 
country other than that of the Borrower for goods or services supplied from the 
territory of any country other than that of the Borrower; 
(b)
the term “local expenditures” means expenditures in the currency of the 
Borrower or for goods or services supplied from the territory of the Borrower; and
(c)
the term “incremental operating and maintenance costs” means incremental 
costs incurred by the Borrower or any Implementation Society for purposes of 
implementing the Project for salaries paid in respect of posts created for the Project 
after February 28, 1999, supervision travel, office expenses, and the operation and 
maintenance of additional equipment purchased under the First National Aids Control 
Project or the Project, vehicles (including the hiring of vehicles), buildings and 
offices.
3.
Notwithstanding the provisions of paragraph 1 above, no withdrawals shall be 
Page  10
made in respect of payments made for:
(a)
expenditures prior to the date of this Agreement, except that 
withdrawals, in an aggregate amount not exceeding the equivalent of SDR 9,000,000, may 
be made in respect of Categories (1) through (5) set forth in the table in Part A.1 of 
this Schedule on account of payments made for expenditures before that date but after 
February 28, 1999;
(b)
expenditures incurred in or by any State or Union Territory of the 
Borrower or any municipal corporation or other municipal authority within any such 
State or Union Territory that is not a Project State;
(c)
expenditures incurred by the Borrower at the national level, unless and 
until the Borrower shall execute a contract with a procurement agent for the 
procurement of goods selected in accordance with the provisions of Schedule 3 to this 
Agreement; and
(d)
expenditures incurred in or by any Project State or its Implementation 
Society for any activities under the Project, unless and until: (i) such 
Implementation Society has been duly registered under the applicable Societies 
Registration Act; (ii) the Borrower, such Project State and Implementation Society 
have executed a Memorandum of Understanding satisfactory to the Association and 
furnished a copy thereof to the Association pursuant to Section 3.01(c) of this 
Agreement; (iii) such Project State and Implementation Society have furnished to the 
Borrower and the Association their Project Implementation Plan satisfactory to the 
Borrower and the Association; and (iv) such Project State and Implementation Society 
have, in the reasonable opinion of the Association, made substantial progress on pilot 
projects on targeted interventions.
4.
The Association may require withdrawals from the Credit Account to be made on 
the basis of statements of expenditure for expenditures for: (a) works under contracts 
costing $300,000 equivalent or less each; (b) goods (except vehicles) under contracts 
costing $300,000 equivalent or less each; (c) vehicles under contracts costing 
$100,000 equivalent or less each; (d) services under contracts costing less than 
$100,000 equivalent each in the case of firms and $50,000 equivalent each in the case 
of individuals; and (e) incremental operating and maintenance costs; all under such 
terms and conditions as the Association shall specify by notice to the Borrower.
B.
Special Account
1.
The Borrower shall open and maintain in dollars a special deposit account in the 
Reserve Bank of India, on terms and conditions satisfactory to the Association.
2.
After the Association has received evidence satisfactory to it that the Special 
Account has been opened, withdrawals from the Credit Account of amounts to be 
deposited into the Special Account shall be made as follows:
(a)
until the Association shall have received (i) the first Project 
Management Report referred to in Section 4.02(b) of this Agreement and (ii) a request 
from the Borrower for withdrawal on the basis of Project Management Reports, 
withdrawals shall be made in accordance with the provisions of Annex A to this 
Schedule 1; and
(b)
upon receipt by the Association of a Project Management Report pursuant 
to Section 4.02(b) of this Agreement, accompanied by a request from the Borrower for 
withdrawal on the basis of Project Management Reports, all further withdrawals shall 
be made in accordance with the provisions of Annex B to this Schedule 1.
3.
Payments out of the Special Account shall be made exclusively for Eligible 
Expenditures.  For any payment made by the Borrower out of the Special Account, the 
Borrower shall, at such time as the Association shall reasonably request, furnish to 
the Association such documents and other evidence showing that such payment was made 
exclusively for Eligible Expenditures.
4.
Notwithstanding the provisions of Part B.2 of this Schedule, the Association 
shall not be required to make further deposits into the Special Account:
Page  11
(a)
if the Association determines at any time that any Project Management 
Report does not adequately provide the information required pursuant to Section 4.02 
of this Agreement;
(b)
if the Association determines at any time that all further withdrawals 
should be made by the Borrower directly from the Credit Account; or
(c)
if the Borrower, any Project State or Implementation Society shall have 
failed to furnish to the Association within the period of time specified in Section 
4.01(b)(ii) of this Agreement, any of the audit reports required to be furnished to 
the Association pursuant to said Section in respect of the audit of (A) the records 
and accounts for the Special Account or (B) the records, accounts and financial 
statements reflecting expenditures with respect to which withdrawals were made on the 
basis of Project Management Reports or statements of expenditure.
5.
The Association shall not be required to make further deposits into the Special 
Account in accordance with the provisions of Part B.2 of this Schedule if, at any 
time, the Association shall have notified the Borrower of its intention to suspend in 
whole or in part the right of the Borrower to make withdrawals from the Credit Account 
pursuant to Section 6.02 of the General Conditions.  Upon such notification, the 
Association shall determine, in its sole discretion, whether further deposits into the 
Special Account may be made and what procedures should be followed for making such 
deposits, and shall notify the Borrower of its determination.
6.
(a)
If the Association determines at any time that any payment out of the 
Special Account was made for an expenditure which is not an Eligible Expenditure, or 
was not justified by the evidence furnished to the Association, the Borrower shall, 
promptly upon notice from the Association, provide such additional evidence as the 
Association may request, or deposit into the Special Account (or, if the Association 
shall so request, refund to the Association) an amount equal to the amount of such 
payment. Unless the Association shall otherwise agree, no further deposit by the 
Association into the Special Account shall be made until the Borrower has provided 
such evidence or made such deposit or refund, as the case may be.
(b)
If the Association determines at any time that any amount outstanding in 
the Special Account will not be required to cover payments for Eligible Expenditures 
during the six-month period following such determination, the Borrower shall, promptly 
upon notice from the Association, refund to the Association such outstanding amount.
(c)
The Borrower may, upon notice to the Association, refund to the 
Association all or any portion of the funds on deposit in the Special Account.
(d)
Refunds to the Association made pursuant to sub-paragraph (a), (b) or (c) 
of this paragraph 6 shall be credited to the Credit Account for subsequent withdrawal 
or for cancellation in accordance with the provisions of this Agreement.
Annex A to SCHEDULE 1
Operation of Special Account When Withdrawals Are Not Made 
On the Basis of Project Management Reports
1.
For the purposes of this Annex, the term “Authorized Allocation” means an amount 
equivalent to $10,000,000 to be withdrawn from the Credit Account and deposited into 
the Special Account pursuant to paragraph 2 of this Annex; provided, however, that 
unless the Association shall otherwise agree, the Authorized Allocation shall be 
limited to an amount equivalent to $5,000,000 until the aggregate amount of 
withdrawals from the Credit Account, plus the total amount of all outstanding special 
commitments entered into by the Association pursuant to Section 5.02 of the General 
Conditions shall equal or exceed the equivalent of SDR 10,000,000.
2.
Withdrawals of the Authorized Allocation and subsequent withdrawals to replenish 
the Special Account shall be made as follows:
(a)
For withdrawals of the Authorized Allocation, the Borrower shall furnish 
to the Association a request or requests for deposit into the Special Account of an 
amount or amounts which in the aggregate do not exceed the Authorized Allocation.  On 
the basis of each such request, the Association shall, on behalf of the Borrower, 
Page  12
withdraw from the Credit Account and deposit into the Special Account such amount as 
the Borrower shall have requested.
(b)
For replenishment of the Special Account, the Borrower shall furnish to 
the Association requests for deposit into the Special Account at such intervals as the 
Association shall specify. Prior to or at the time of each such request, the Borrower 
shall furnish to the Association the documents and other evidence required pursuant to 
Part B.3 of Schedule 1 to this Agreement for the payment or payments in respect of 
which replenishment is requested.  On the basis of each such request, the Association 
shall, on behalf of the Borrower, withdraw from the Credit Account and deposit into 
the Special Account such amount as the Borrower shall have requested and as shall have 
been shown by said documents and other evidence to have been paid out of the Special 
Account for Eligible Expenditures.  Each such deposit into the Special Account shall 
be withdrawn by the Association from the Credit Account under one or more of the 
Eligible Categories.
3.
The Association shall not be required to make further deposits into the Special 
Account, once the total unwithdrawn amount of the Credit, minus the total amount of 
all outstanding special commitments entered into by the Association pursuant to 
Section 5.02 of the General Conditions, shall equal the equivalent of twice the amount 
of the Authorized Allocation.  Thereafter, withdrawal from the Credit Account of the 
remaining unwithdrawn amount of the Credit shall follow such procedures as the 
Association shall specify by notice to the Borrower.  Such further withdrawals shall 
be made only after and to the extent that the Association shall have been satisfied 
that all such amounts remaining on deposit in the Special Account as of the date of 
such notice will be utilized in making payments for Eligible Expenditures.
Annex B to SCHEDULE 1
Operation of Special Account When Withdrawals Are Made 
On the Basis of Project Management Reports
1.
Except as the Association may otherwise specify by notice to the Borrower, all 
withdrawals from the Credit Account shall be deposited by the Association into the 
Special Account in accordance with the provisions of Schedule 1 to this Agreement.  
Each such deposit into the Special Account shall be withdrawn by the Association from 
the Credit Account under one or more of the Eligible Categories.
2.
Each application for withdrawal from the Credit Account for deposit into the 
Special Account shall be supported by a Project Management Report.
3.
Upon receipt of each application for withdrawal of an amount of the Credit, the 
Association shall, on behalf of the Borrower, withdraw from the Credit Account and 
deposit into the Special Account an amount equal to the lesser of: (a) the amount so 
requested; and (b) the amount which the Association has determined, based on the 
Project Management Report accompanying said application, is required to be deposited 
in order to finance Eligible Expenditures during the six-month period following the 
date of such report; provided, however, that the amount so deposited, when added to 
the amount indicated by said Project Management Report to be remaining in the Special 
Account, shall not exceed the equivalent of $24,000,000.
SCHEDULE 2
Description of the Project
The objectives of the Project are to assist the Borrower in reducing the rate of 
growth of HIV infection in India and in strengthening the Borrower’s own capacity to 
respond to HIV/AIDS.
The Project consists of the following parts, subject to such modifications 
thereof as the Borrower and the Association may agree upon from time to time to 
achieve such objectives:
Part A:
Delivering Cost-effective Prevention and Care Interventions Against 
HIV/AIDS
1.
Priority targeted interventions for groups at high risk
Page  13
(a)
Identifying groups at highest risk of contracting HIV/AIDS with emphasis 
on: (i) participatory mapping of groups at high risk, chiefly commercial sex-trade 
workers, truck drivers, injecting drug users, migrant laborers and men having sex with 
men; (ii) determining the access to, and demand for, health services among the groups 
at high risk; and (iii) developing strategies based on outreach, peer education and 
partnerships.
(b)
Providing integrated peer counseling, condoms and treatment of STIs for 
groups at high risk through NGOs and CBOs by: (i) training representatives of groups 
at high risk to provide peer education aimed at changing high-risk behaviors; (ii) 
training primary healthcare providers in sydromic case management and counseling in 
condom use; (iii) strengthening STI clinics in districts; (iv) improving referral 
services for STI treatment; and (v) conducting client programs aimed at delivering 
targeted IEC, condom promotion and STI treatment and counseling to clients of 
commercial sex workers.
2.
Preventive interventions for the general community
(a)
Conducting IEC and awareness campaigns with emphasis on: (i) conducting 
mass media campaigns at the state and municipal levels; (ii) conducting local IEC 
campaigns using traditional media such as folk arts and street theatre; \0b(iii) 
conducting awareness programs geared toward youth and college students; and \0b(iv) 
conducting regular family health awareness campaigns.
(b)
 Providing voluntary testing and counseling with emphasis on: \0b(i) 
increasing the availability of, and demand for, voluntary testing, including joint 
testing of couples; (ii) training grassroots-level healthcare workers around HIV/AIDS 
counseling; and (iii) providing counseling services through all blood banks in India 
(public and private) and through public STI clinics.
(c)
Reducing transmission by blood transfusions and occupational exposure by: 
(i) setting up new modern blood banks, upgrading existing major blood banks where 
there is demand and setting up new district-level blood banks; (ii) establishing 
component separation units; (iii) establishing mandatory screening of all blood units 
for Hepatitis C virus; (iv) mobilizing voluntary blood donation; (v) training 
providers in the rational use of blood products; (vi) facilitating communications 
among blood banking services; (vii) providing trained counselors for blood banks in 
both the public and private sectors; and (viii) training health care workers at all 
levels in universal precautions and provision of prophylaxis.
3.
Low-cost AIDS care
(a)
Improving the quality and cost-effectiveness of interventions offered by 
existing providers by: (i) establishing best-practice guidelines and providing the 
appropriate drugs for treating common OIs at district hospitals; and (ii) training 
selected state-level hospitals in the provision of referral services.
(b)
Establishing new support services for care for persons with AIDS in 
partnership with NGOs and CBOs, including small community-care hospitals, hospice 
programs, drop-in centers, support groups and home-based care.
Part B:
Strengthening Capacity to Respond to HIV/AIDS
1.
Institutional strengthening
(a)
Building implementation capacity at the state and municipal levels 
by:\0b(i) forming and strengthening Implementation Societies; (ii) ensuring adequate 
staff and skills in such Implementation Societies; (iii) transferring implementation 
responsibilities from the national level to the state and municipal levels; and (iv) 
emphasizing primary health approaches and training; and (v) strengthening planning, 
management and implementation capacities at all levels.
(b)
Strengthening the leadership capacities of NACO with emphasis on: (i) 
strengthening strategic planning skills; (ii) focusing on disseminating best practices 
for targeted interventions; (iii) establishing and managing networks of technical 
expertise (TRGs) in STI/HIV/AIDS, which will catalyze and prioritize operational 
Page  14
research and interventions and inform policy decisions; (iv) conducting operational 
research; and (v) overseeing research and development activities.
(c)
Expanding and improving nationwide STI/HIV/AIDS surveillance, including: 
(i) annual HIV sentinel surveillance in every Project State; (ii) STI surveillance 
through specific surveys; (iii) behavioral surveillance surveys; and (iv) AIDS cases 
surveillance.
(d)
Conducting training of local staff in management and provision of 
interventions with emphasis on: (i) conducting a training needs assessment; (ii) 
developing training materials; (iii) conducting training of trainers; (iv) providing 
worksite-specific training to supervisors; (v) developing training best practices; and 
(vi) providing training for intersectoral groups, government officials and social and 
religious leaders.
(e)
Building capacity for monitoring and evaluating National HIV/AIDS Control 
Program activities by: (i) creating a computerized management information system at 
the national and state levels; (ii) training NACO staff and health specialists in 
evidence-based health program management; (iii) conducting baseline, mid-term and 
final evaluations and strengthening monitoring and evaluation; and (iv) conducting 
Performance and Expenditure Annual Reviews and National Program Reviews.
(f)
Increasing the Borrower’s capacity for research on HIV/AIDS by: (i) 
enlisting Indian academic institutions to conduct epidemiological and operational 
research, including STI/HIV/AIDS research and research into indigenous systems of 
medicine, through peer-reviewed competitions; (ii) establishing links between Indian 
research institutions and multilateral and international institutions; and (iii) 
piloting efforts to develop an HIV vaccine, including strengthened links to 
international HIV research agencies and products.
2.
Intersectoral collaboration
Promoting collaboration among the Borrower’s national agencies and departments 
and private and voluntary sectors by: (i) learning from the innovative HIV/AIDS 
programs that exist in other sectors; and (ii) sharing in the work of generating 
awareness and advocacy and of delivering preventive interventions.
**
*
The Project is expected to be completed by July 31, 2004.
SCHEDULE 3
Procurement
Section I.
Procurement of Goods and Works
Part A:
General
1.
Goods and works shall be procured in accordance with (a) the provisions of 
Section I of the “Guidelines for Procurement under IBRD Loans and IDA Credits” 
published by the Bank in January 1995 and revised in January and August 1996, 
September 1997 and January 1999, subject to the modifications thereto set forth in 
paragraph 2 of this Part A (the Guidelines), and (b) the provisions of the following 
Parts of this Section I.
2.
In paragraphs 1.6 and 1.8 of the Guidelines, the references to “Bank member 
countries” and "member country” shall be deemed to be references, respectively, to 
“Participating Countries” and "Participating Country.”
Part B:
International Competitive Bidding
1.
Except as otherwise provided in Part C of this Section, goods (including 
vehicles) shall be procured under contracts awarded in accordance with the provisions 
of Section II of the Guidelines and paragraph 5 of Appendix 1 thereto.
2.
The provisions of paragraphs 2.54 and 2.55 of the Guidelines and Appendix 2 
Page  15
thereto shall apply to goods manufactured in the territory of the Borrower and to be 
procured under contracts awarded in accordance with the provisions of paragraph 1 of 
this Part B.
Part C:
Other Procurement Procedures
1.
Civil Works
(a)
Civil works estimated to cost more than $30,000 equivalent per contract 
shall be procured under contracts awarded on the basis of competitive bidding 
advertised nationally, in accordance with procedures agreed with the Association.
(b)
Civil works estimated to cost $30,000 equivalent or less per contract, up 
to an aggregate amount not to exceed $3,520,000 equivalent, may:
(i)
be procured by direct contracting in accordance with the 
provisions of 
paragraph 3.7 of the Guidelines, up to an 
aggregate amount not to exceed 
$500,000 equivalent;
(ii)
be procured under lump-sum, fixed-price contracts awarded on the 
basis of 
quotations obtained from three (3) qualified domestic 
contractors in response 
to a written invitation.  The invitation shall 
include a detailed description 
of the works, including basic 
specifications, the required completion date, a 
basic form of 
agreement acceptable to the Association, and relevant drawings, 
where 
applicable.  The award shall be made to the contractor who offers the 
lowest price quotation for the required work, and who has the experience and 
resources to complete the contract successfully;
(iii)
be procured under the unit/piece rate systems through qualified 
contractors or 
registered NGOs or other beneficiary associations; or
(iv)
as a last resort, be carried out by force account in a manner 
satisfactory to 
the Association if they meet the requirements of the 
provisions of paragraph 
3.8 of the Guidelines, up to an aggregate 
amount not to exceed $1,400,000 
equivalent.
2.
Goods (Except Vehicles)
(a)
Goods (except vehicles) estimated to cost $300,000 equivalent or less per 
contract, up to an aggregate amount not to exceed $30,030,000 equivalent, may be 
procured under contracts awarded on the basis of competitive bidding advertised 
nationally, in accordance with procedures agreed with the Association.
(b)
Goods (except vehicles) estimated to cost $30,000 equivalent or less per 
contract, up to an aggregate amount not to exceed $19,000,000 equivalent, may be 
procured under contracts awarded on the basis of national shopping procedures in 
accordance with the provisions of paragraphs 3.5 and 3.6 of the Guidelines.
(c)
Goods (except vehicles) estimated to cost less than $5,000 equivalent per 
contract, up to an aggregate amount not to exceed $750,000 equivalent, may be 
procured:
(i)
under contracts awarded on the basis of national shopping 
procedures in 
accordance with the provisions of paragraphs 
3.5 and 3.6 of the Guidelines; or 
(ii)
by direct contracting in accordance with the provisions of 
paragraph 3.7 of 
the Guidelines.
3.
Vehicles
Vehicles estimated to cost $100,000 equivalent or less per contract, up to an 
aggregate amount not to exceed $1,330,000 equivalent, may be procured under contracts 
awarded on the basis of national shopping procedures in accordance with the provisions 
of paragraphs 3.5 and 3.6 of the Guidelines.
4.
Contracts for Maintenance of Buildings and Equipment
Page  16
Contracts for maintenance of buildings and equipment estimated to cost $20,000 
equivalent or less per contract, up to an aggregate amount not to exceed $4,130,000 
equivalent, may:
(i)
be procured by direct contracting in accordance with the 
provisions of 
paragraph 3.7 of the Guidelines, up to an 
aggregate amount not to exceed 
$1,000,000 equivalent;
(ii)
be procured under lump-sum, fixed-price contracts awarded on the 
basis of 
quotations obtained from three (3) qualified domestic 
contractors in response 
to a written invitation.  The invitation shall 
include a detailed description 
of the requirements, including basic 
specifications, the required completion 
date, and a basic form of 
agreement acceptable to the Association.  The award 
shall be made to the 
contractor who offers the lowest price quotation for the 
required 
work, and who has the experience and resources to complete the 
contract successfully;
(iii)
be procured under the unit/piece rate systems through qualified 
contractors or 
registered NGOs or other beneficiary associations; or
(iv)
as a last resort, be procured by force account in a manner 
satisfactory to the 
Association if they meet the requirements of 
the provisions of paragraph 3.8 
of the Guidelines, up to an aggregate 
amount not to exceed $200,000 
equivalent.
Part D:
Review by the Association of Procurement Decisions
1.
Procurement Planning
Prior to the issuance of any invitations to bid for contracts, the proposed 
procurement plan for the Project shall be furnished to the Association for its review 
and approval, in accordance with the provisions of paragraph 1 of Appendix 1 to the 
Guidelines.  Procurement of all goods and works shall be undertaken in accordance with 
such procurement plan as shall have been approved by the Association, and with the 
provisions of said paragraph 1.
2.
Prior Review
With respect to (a) each contract for works estimated to cost more than the 
equivalent of $300,000, (b) each contract for goods (including vehicles) estimated to 
cost more than the equivalent of $300,000, (c) the first contract for vehicles 
estimated to cost more than the equivalent of $100,000 but not more than the 
equivalent of $300,000, (d) the first contract for works estimated to cost more than 
the equivalent of $30,000 but not more than the equivalent of $300,000, (e) the first 
contract for goods (except vehicles) estimated to cost more than the equivalent of 
$30,000 but not more than the equivalent of $300,000, the procedures set forth in 
paragraphs 2 and 3 of Appendix 1 to the Guidelines shall apply.
3.
Post Review
With respect to each contract not governed by paragraph 2 of this Part, the 
procedures set forth in paragraph 4 of Appendix 1 to the Guidelines shall apply.
Section II.
Employment of Consultants
Part A:
General
1.
Consultants’ services shall be procured in accordance with (a) the provisions of 
the Introduction and Section IV of the “Guidelines: Selection and Employment of 
Consultants by World Bank Borrowers” published by the Bank in January 1997 and revised 
in September 1997 and January 1999, subject to the modifications thereto set forth in 
paragraph 2 of this Part A (the Consultant Guidelines), and (b) the provisions of the 
following Parts of this Section II.
2.
In paragraph 1.10 of the Consultant Guidelines, the references to “Bank member 
Page  17
countries” and “member country” shall be deemed to be references, respectively, to 
“Participating Countries” and “Participating Country.”
Part B:
Quality- and Cost-based Selection
1.
Except as otherwise provided in Part C of this Section, consultants’ services 
shall be procured under contracts awarded in accordance with the provisions of Section 
II of the Consultant Guidelines, paragraph 3 of Appendix 1 thereto, Appendix 2 
thereto, and the provisions of paragraphs 3.13 through 3.18 thereof applicable to 
quality- and cost-based selection of consultants.
2.
The following provisions shall apply to consultants’ services to be procured 
under contracts awarded in accordance with the provisions of the preceding paragraph. 
The short list of consultants for (i) professional services, mass media/IEC, 
monitoring and evaluation, large NGO services estimated to cost less than $200,000 
equivalent per contract, up to an aggregate amount not to exceed $14,880,000 
equivalent, and (ii) professional services, mass media/IEC, monitoring and evaluation, 
large NGO services, operational research, research and development, cause of death and 
other studies, training, workshops and fellowships estimated to cost less than 
$100,000 equivalent per contract, up to an aggregate amount not to exceed $51,620,000 
equivalent, may comprise entirely national consultants in accordance with the 
provisions of paragraph 2.7 of the Consultant Guidelines.
Part C:
Other Procedures for the Selection of Consultants
1.
Single Source Selection/Use of NGOs
Professional services, mass media/IEC, monitoring and evaluation, large NGO 
services, operational research, research and development, cause of death and other 
studies, training, workshops and fellowships, estimated to cost less than $100,000 
equivalent per contract, up to an aggregate amount not to exceed $51,620,000 
equivalent when added to the contracts for such services procured pursuant to 
paragraph 1 of Part B of this Section II, may:
(i)
be procured in accordance with the provisions of paragraphs 3.8 
through 3.11 
of the Consultant Guidelines and project-specific procedures 
agreed with the 
Association and set forth in the Project 
Implementation Plans; or
(ii)
be procured in accordance with the provisions of paragraph 3.14 of 
the 
Consultant Guidelines and project-specific procedures agreed 
with the 
Association and set forth in the Project 
Implementation Plans.
2.
Service Delivery Contractors
Targeted services for priority interventions, operational research, cause of 
death and other studies estimated to cost less than $20,000 equivalent per contract, 
up to an aggregate amount not to exceed $28,870,000 equivalent, shall be procured in 
accordance with the provisions of paragraph 3.19 of the Consultant Guidelines and 
project-specific procedures agreed with the Association and set forth in the Project 
Implementation Plans.
3.
Individual Consultants
Services for tasks that meet the requirements set forth in paragraph 5.1 of the 
Consultant Guidelines shall be procured under contracts awarded to individual 
consultants in accordance with the provisions of paragraphs 5.1 through 5.3 of the 
Consultant Guidelines.
Part D:
Review by the Association of the Selection of Consultants
1.
Selection Planning
Prior to the issuance to consultants of any requests for proposals, the proposed plan 
for the selection of consultants under the Project shall be furnished to the 
Association for its review and approval, in accordance with the provisions of 
Page  18
paragraph 1 of Appendix 1 to the Consultant Guidelines.  Selection of all consultants’ 
services shall be undertaken in accordance with such selection plan as shall have been 
approved by the Association, and with the provisions of said paragraph 1.
2.
Prior Review
(a)
With respect to each contract for the employment of consulting firms 
estimated to cost the equivalent of $200,000 or more, the procedures set forth in 
paragraphs 1, 2 (other than the third subparagraph of paragraph 2(a)) and 5 of 
Appendix 1 to the Consultant Guidelines shall apply.
(b)
With respect to each contract for the employment of consulting firms 
estimated to cost the equivalent of $100,000 or more, but less than the equivalent of 
$200,000, the procedures set forth in paragraphs 1, 2 (other than the second 
subparagraph of paragraph 2(a)) and 5 of Appendix 1 to the Consultant Guidelines shall 
apply.
(c)
With respect to each contract for the employment of individual 
consultants estimated to cost the equivalent of $50,000 or more, the qualifications, 
experience, terms of reference and terms of employment of the consultants shall be 
furnished to the Association for its prior review and approval.  The contract shall be 
awarded only after the said approval shall have been given.
3.
Post Review
With respect to each contract not governed by paragraph 2 of this Part, the 
procedures set forth in paragraph 4 of Appendix 1 to the Consultant Guidelines shall 
apply.
SCHEDULE 4
Implementation Program
Project Implementation/Priorities
1.
The Borrower shall, and shall cause the Project States and their Implementation 
Societies to, carry out the Project in accordance with (i) their respective Project 
Implementation Plans and (ii) the National Policy Letter.
2.
Without limitation on any other provisions of this Agreement, the Borrower shall 
ensure that in implementing the Project, the Borrower, the Project States and their 
Implementation Societies will at all times give utmost priority to: (i) successful 
implementation of targeted interventions for groups at high risk of contracting HIV 
under Part A.1 of the Project, thus preventing spread of infection to the general 
community;\0b(ii) efficient and timely procurement of goods, works and services in 
accordance with procurement plans agreed with the Association; (iii) monitoring and 
evaluation, including Performance and Expenditure Annual Reviews, with particular 
attention to the monitoring indicators referred to in paragraph 17(a) of this Schedule 
leading to the reduction in the rate of growth of HIV infection; (iv) timely 
completion and reporting of annual sentinel surveillance by November 15 of each year; 
(v) protection of human rights of persons with HIV/AIDS; and (vi) ensuring voluntary 
and confidential testing 
and counseling for HIV in the public and voluntary sectors.
3.
The Borrower shall not use the proceeds of the Credit to finance the procurement 
of any drug that has not previously been approved for financing by the Association, 
unless and until the Borrower has furnished to the Association a proposal for 
procuring such drug, satisfactory to the Association, detailing an analysis of cost 
effectiveness, recurrent cost liability, public-private benefits, impact on the poor 
and consistency with the objectives of the Project.
NACO Staffing and Resources; Maintenance of Autonomy
4.
The Borrower shall: (i) maintain NACO with adequate powers, functions, staff and 
resources satisfactory to the Association, including without limitation (a) adequate 
representation on its governing body of NGOs and CBOs facilitating the delivery of 
Project benefits to its beneficiaries and (b) a nodal officer responsible for 
Page  19
reviewing grievances regarding non-observance of human rights of persons with 
HIV/AIDS; and (ii) ensure the continuity of key staff at NACO identified in the 
Project Implementation Plan of the Borrower at least during the first two years of 
Project implementation.
5.
The Borrower shall ensure that during Project implementation, NACO will continue 
to report to the National AIDS Control Board and maintain, at a minimum, its financial 
and administrative autonomy as delegated to it during the implementation of the First 
National Aids Control Project.
Implementation Society Staffing and Resources
6.
The Borrower shall cause each Project State and its Implementation Society to: 
(i) maintain such Implementation Society with adequate powers, functions, staff and 
resources satisfactory to the Association, including without limitation (a) adequate 
representation on its Executive Committee (or equivalent governing body) of NGOs and 
CBOs facilitating the delivery of Project benefits to its beneficiaries and (b) a 
nodal officer responsible for reviewing grievances regarding non-observance of human 
rights of persons with HIV/AIDS; and (ii) ensure the continuity of key staff at such 
Implementation Society identified in the Project Implementation Plan of the Borrower 
(including without limitation its Project Director) at least during the first two 
years of Project implementation.
Financial Management Systems
7.
The Borrower shall, and shall cause each of the Project States and its 
Implementation Society to, appoint by October 31, 1999, and thereafter maintain, core 
financial staff as specified in the Project Implementation Plan of the Borrower.
8.
The Borrower shall appoint by September 30, 1999, and thereafter maintain, a 
firm of chartered accountants with terms of reference and qualifications satisfactory 
to the Association for auditing the records, accounts and financial statements for the 
Project.
Annual Procurement Plans
9.
The Borrower shall, and shall cause each Project State and its Implementation 
Society to, ensure that procurement of goods, works and services is undertaken in 
accordance with procedures and time schedules specified in the consolidated annual 
procurement plans approved by the Association.
Unsatisfactory Performance of Project Activities
10.
If, as a result of the Performance and Expenditure Annual Review for any Fiscal 
Year, the performance of any Project State or its Implementation Society during such 
Fiscal Year is deemed by the Association to be less than satisfactory, the Borrower 
shall not make any part of the proceeds of the Credit available to such Project State 
or its Implementation Society for any of their activities carried out under the 
Project during the immediately following Fiscal Year. \0cNational Program Reviews
11.
By June 30 of each year, the Borrower shall, through its National AIDS Control 
Board, carry out a National Program Review in accordance with terms of reference 
satisfactory to the Association.
Independent Assessment of Implementation Societies
12.
The Borrower shall: (i) during FY 2000-01 or FY 2001-02, conduct an assessment 
by an independent reviewer satisfactory to the Association of the management and 
governance of selected Implementation Societies and their work programs, with the list 
of such Implementation Societies and terms of reference satisfactory to the 
Association; and (ii) within sixty (60) days of the completion of such assessment, 
furnish to the Association a report of such assessment.
Tribal Peoples
13.
The Borrower shall, and shall cause each Project State and its Implementation 
Society to, implement the Project in all tribal areas (as designated by such Project 
Page  20
State in accordance with applicable state laws) in accordance with the procedures and 
strategies for the delivery of Project benefits to tribal people as set forth in their 
respective Project Implementation Plans.
Resettlement and Rehabilitation
14.
The Borrower shall, and shall cause each Project State and its Implementation 
Society to, ensure that no involuntary resettlement arises from any land acquisition, 
use of land or change of land use under the Project, except to the extent that such 
Project State and Implementation Society shall: (i) sufficiently in advance of such 
land acquisition or land use, prepare a resettlement plan satisfactory to the 
Association by, inter alia, undertaking meaningful consultation with affected people 
and incorporating their views in the plan and submit it to the Association; and (ii) 
thereafter implement such resettlement plan in a manner and with a timetable 
satisfactory to the Association.
Quality of Condoms and Drugs/Independent Review of Procurement and Quality
15.
The Borrower shall ensure that all condoms and drugs used in the National 
HIV/AIDS Control Program irrespective of their sources of financing: (i) conform at 
least to minimum quality standards established by the World Health Organization; and 
(ii) comply with the good manufacturing practices (GMP) guidelines established by the 
Borrower.
16.
The Borrower shall: (i) during FY 2000-01 conduct a review by an independent 
reviewer satisfactory to the Association of the procurement methods and quality of all 
condoms and drugs used in the National HIV/AIDS Control Program irrespective of their 
sources of financing, with terms of reference satisfactory to the Association; and 
(ii) within sixty (60) days of the completion of such review, furnish to the 
Association a report of such review.
Monitoring and Evaluation; Performance and Expenditure Annual Reviews
17.
The Borrower shall:
(a)
maintain, and cause each Project State and its Implementation Society to 
maintain, policies and procedures adequate to enable them to monitor and evaluate on 
an ongoing basis, in accordance with indicators satisfactory to the Association, the 
carrying out of the Project and the achievement of the objectives thereof;
(b)
prepare, and cause each Project State and its Implementation Society to 
prepare, under terms of reference satisfactory to the Association, and furnish to the 
Association, by May 31 of each year, a report for a Performance and Expenditure Annual 
Review, integrating the results of the monitoring and evaluation activities performed 
pursuant to subparagraph (a) of this paragraph, on the progress achieved in the 
carrying out of the Project during the period preceding the date of said report and 
setting out the measures recommended to ensure the efficient carrying out of the 
Project and the achievement of the objectives thereof during the period following such 
date; and
(c)
conduct a Performance and Expenditure Annual Review with the Association, 
by June 30 of each year, or such later date as the Association shall request, 
including a review of the report referred to in subparagraph (b) of this paragraph, 
cause each Project State and its Implementation Society to participate in such 
Performance and Expenditure Annual Review as necessary or appropriate, and, 
thereafter, take, and cause each Project State and its Implementation Society to take, 
all measures required to ensure the efficient carrying out of the Project and the 
achievement of the objectives thereof, based on the conclusions and recommendations of 
the said report and the Association’s views on the matter. \0cSCHEDULE 5
Memorandum of Understanding
Except as the Association shall otherwise agree, the Memorandum of Understanding 
to be executed by the Borrower, each Project State and its Implementation Society 
shall include, inter alia, the following provisions:
(a)
Each Project State and its Implementation Society shall declare their 
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commitment to the objectives of the Project as set forth in Schedule 2 to the 
Development Credit Agreement, and to this end, shall agree to carry out their portion 
of the Project with due diligence and efficiency and in conformity with appropriate 
administrative, financial, ethical and public health practices and the National Policy 
Letter (as such term is defined in the Development Credit Agreement), and to provide, 
or cause to be provided, promptly as needed, the funds, facilities, services and other 
resources required for their portion of the Project.
(b)
Each Project State and its Implementation Society shall agree to assume 
all the obligations applicable or relevant to such Project State and Implementation 
Society under the Development Credit Agreement and to take all actions necessary to 
undertake their portion of the Project.  Each Project State and its Implementation 
Society shall further agree to carry out their portion of the Project in accordance 
with the Implementation Program set forth in Schedule 4 to the Development Credit 
Agreement, their Project Implementation Plan and the National Policy Letter (as such 
terms are defined in the Development Credit Agreement).
(c)
The Borrower shall agree to make available to each Implementation 
Society, as a grant and at least on an annual basis in a timely manner, part of the 
proceeds of the Credit and additional funds from the Borrower’s own resources, in 
amounts sufficient to cover the amounts required by such Implementation Society in 
carrying out its portion of the Project.
(d)
Each Project State and its Implementation Society shall agree that 
procurement of the goods, works and consultants’ services required for the Project and 
to be financed out of the proceeds of the Credit shall be governed by the provisions 
of Schedule 3 to the Development Credit Agreement.
(e)
Each Project State and its Implementation Society shall agree that the 
Borrower and the Association may from time to time inspect the goods, works and 
services under the Project including all records and documents relating thereto.
(f)
Each Project State and its Implementation Society shall agree to carry 
out the obligations set forth in Sections 9.03, 9.04, 9.05, 9.06, 9.07 and 9.08 
(relating to insurance, use of goods and services, plans and schedules, records and 
reports, maintenance and land acquisition, respectively) of the General Conditions (as 
such term is defined in the Development Credit Agreement) in respect of their 
Memorandum of Understanding and their portion of the Project.
(g)
Each Project State and its Implementation Society shall agree to comply 
and assist the Borrower in complying with the financial covenants prescribed by 
Article IV of the Development Credit Agreement.
(h)
Each Project State and its Implementation Society shall acknowledge that 
the Borrower may suspend or terminate their right to use the proceeds of the Credit 
made available under the Development Credit Agreement upon their failure to perform 
any of their obligations under their Memorandum of Understanding or upon notice by the 
Association to the Borrower that it intends to exercise its remedies under Article V 
of the Development Credit Agreement.
(i)
Without limitation on any other provisions of the Memorandum of 
Understanding, each Project State and its Implementation Society shall acknowledge 
that if, as a result of the Performance and Expenditure Annual Review for any Fiscal 
Year (as such terms are defined in the Development Credit Agreement), the performance 
of such Project State or its Implementation Society during such Fiscal Year is deemed 
by the Association to be less than satisfactory, the Borrower is not permitted to make 
any part of the proceeds of the Credit available to such Project State or its 
Implementation Society for any of their activities carried out under the Project 
during the immediately following Fiscal Year.
(j)
Each Project State and its Implementation Society shall agree to promptly 
inform the Borrower and the Association of any condition which interferes or threatens 
to interfere with the progress of their portion of the Project, the accomplishment of 
the purposes of the Credit, or the performance of their obligations under their 
Memorandum of Understanding.
(k)
Each Project State and its Implementation Society shall agree that they 
shall, from time to time, at the request of the Borrower or the Association, (i) 
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exchange views with the Borrower and/or the Association with regard to the progress of 
their portion of the Project, the performance of their obligations under their 
Memorandum of Understanding and other matters relating to the purposes of the Credit 
and (ii) furnish all such information related thereto as may reasonably be required by 
the Borrower and/or the Association.
(l)
Each Project State and its Implementation Society shall agree that they 
shall: (i) prepare, on the basis of guidelines acceptable to the Association, and 
furnish to the Association not later than six (6) months after the Closing Date (as 
such term is defined in the Development Credit Agreement) or such later date as may be 
agreed for this purpose among the Association, the Borrower, such Project State and 
Implementation Society, a plan designed to ensure the continued achievement of the 
Project’s objectives; and (ii) afford the Association a reasonable opportunity to 
exchange views with such Project State and Implementation Society on said plan.