Document of FiLE COPY The World Bank FOR OFFICIAL USE ONLY RETURN TO REPORTS DESK Report No. P=2062-IN WITHIN ONE WEEK REPORT AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN TO INDIA FOR THE BOMBAY HIGH OFFSHORE DEVELOPMENT PROJECT June 20, 1977 This document has a restricted distribution and may be used by recipients only In the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. CURRENCY EQUIVALENTS (as of June 14, 1977) Rs 1.00 = Paise 100 US$1.00 = Rs 8.80 Rs 1.00 = US$0.1136 Rs 1 million = US$113,600 (Since September 24, 1975 the Rupee has been officially valued relative to a "basket" of currencies. As these currencies are now floating, the US Dollar/Rupee exchange rate is subject to change. Conversions in the Appraisal Report were made at US$1 to Rs 9.00). FISCAL YEAR April 1 - March 31 ABBREVIATIONS AND ACRONYMS ONGC = Oil and Natural Gas Commission GOI = Government of India BHDP = Bombay High Development Project DCF = Discounted Cash Flow Mmi/y = million metric tons per year Mm /d million cubic meters per day b/d = barrels per day LPG = liquefied petroleum gas POL = Petroleum, Oil, Lubrice,* ,s FOR OFFICIAL USE ONLY INDIA -- BOMBAY HIGH OFFSHORE DEVELOPMENT PROJECT LOAN AND PROJECT SUMMARY Borrower: India, acting by its President Beneficiary: Oil and Natural Gas Commission Amount: US$150.0 million Purpose: Construction of the facilities required to produce up to 140,000 barrels per day of oil and 2.2 mil- lion cubic meters per day of natural gas from the Bombay High and Bassein oil and gas fields, located about 160 km and 100 km, respectively, west of Bombay, in the Arabian Sea, and construction of facilities to process, transport, store and deliver to users the oil and natural gas expected to be available from these fields at full production. Terms: Repayment over 20 years, including three years' grace, at 8.20% per annum Relending Terms: Maturity not to exceed 20 years, including three years' grace, at 10-1/4% per annum. Estimated Cost: (US$ Million) Local Foreign Total Wells 12.0 37.0 49.0 Well Platforms 9.0 28.0 37.0 Land 4.5 -- 4.5 Pipelines 18.0 149.0 167.0 Processing Platforms 2.5 82.5 85.0 Oil Terminal 17.0 0.5 17.5 Gas Processing Plant 7.0 5.0 12.0 Oil Stabilization Plant 10.0 1.0 11.0 Supply Base 15.0 -- 15.0 Telecommunications 8.0 4.0 12.0 Customs Duty 12.0 -- 12.0 Consulting Services 9.0 28.0 37.0 Base Cost 124.0 335.0 459.0 Physical Contingencies 19.0 51.0 70.0 Price Contingencies 11.0 31.0 42.0 Total Project Cost 154.0 417.0 571.0 This document has a restricted distribution and may be used by recipients onliy is the performance of their official duties. Its contents may not otherwise be dclosed without Wori Bank authorization. Financing Plan: (US$ Million) ONGC Internal Cash 100.0 GOI Loan/Equity 471.0 of which: IBRD Loan 150.0 Commercial borrowing 50.0* Bilateral assistance 50.0* OIDB Loans 70.0* 571.0 * Estimate Estimated Disbursements: (US$ Million) FY 78 FY 79 FY 80 Total 80.0 63.0 7.0 150.0 Consultants' Services: For design and supervision of construction of the facilities included in the project ........ 11,000 man-months. Rate of Return: 66% (economic) Appraisal Report: No. 1569a-IN, dated June 10, 1977. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN TO INDIA FOR THE BOMBAY HIGH OFFSHORE DEVELOPMENT PROJECT 1. I submit the following report and recommendation on a proposed loan, in an amount equivalent to US$150 million, to the Government of India (GOI), to help finance the construction of facilities required to produce up to 140,000 barrels per day of oil and 2.2 million cubic meters per day of natural gas from the Bombay High and North Bassein oil and gas fields, and the con- struction of facilities to process, transport, store and deliver to users the oil and natural gas expected to be available from these fields at full pro- duction. Amortization would be over 20 years, including three years' grace, at an interest rate of 8.2% per annum. The proceeds of the loan would be on- lent by the GOI to the Oil and Natural Gas Commission for a period of not more than 20 years, including three years' grace, at an interest rate of 10.25% per annum. PART I - THE ECONOMY 1/ 2. An economic report, "Economic Situation and Prospects of India" (1529-IN dated April 25, 1977), was distributed to the Executive Directors on May 3, 1977. Country data sheets are attached as Annex I. Background 3. India is exceptional among the Bank Group's member countries for its size and diversity; the country is divided into more than 20 States with a population of some 630 million speaking over 60 languages. Since Independ- ence the trend in growth of GNP has been about 3.5% per annum, or a little over 1% per annum in per capita terms, while over the five years 1971/72 - 1975/76 it fell to as low as 2.5% per annum, in spite of the record harvest of 1975/76. This unsatisfactory performance is in part the result of the low availability of investable resources: the net transfer of resources from abroad has never been above 3% of GNP, and fell to as little as 0.8% between 1969/70 and 1973/74; similarly, while India's domestic savings effort compares well with other countries at the same average income levels, the rate has very rarely exceeded 17% of GNP. The investment rate puts India in the lower third of all developing countries. More significant perhaps is the fact that in spite of a marked rise in the: investment rate from about 10% in the early 1950's to about 18% over the past fifteen years, the trend in GNP growth has remained about the same. This indicates a marked decline in the efficiency of capital use, as a result of increasing capacity underutilization, long project gesta- tion, and increased emphasis on relatively capital-intensive projects and sectors. 4. Since Independence the growth of the socio-economic infrastructure (transport, education, health services, etc.) has been impressive, but has 1/ Parts I and II of this report are the same as those in the President's Report on the Periyar Vaigai Irrigation Project (P-2045-IN, dated May 19, 1977). often been achieved at high cost and has yielded results of variable quality. Many industrial and agricultural investment schemes have been highly success- ful, but others have taken excessively long to be completed and have operated well below full capacity. In some regions of the country, growth and struc- tural change have been rapid and compare favorably with developments in many other parts of the world; in other regions there has been stagnation, and in some, decline. Although national income has increased in most years, there has been no rise in the living standards of the vast mass of rural and urban poor, conservatively estimated at 200 million people with per capita incomes of US$70 per annum (converted at the official exchange rate) and US$250 on a purchasing power parity basis. 5. The structure of the economy has been slow to change. Agriculture remains the dominant sector, with its share of national product declining only gradually from about 50% to 42% over the last twenty years. The share of manufacturing industry has increased only slowly and, since the late 1960's, has remained approximately constant at about 16%. There has, however, been a shift in the composition of manufacturing production, with consumer, inter- mediate, and capital goods now contributing about one-third each, compared with an overwhelming preponderance of consumer goods 25 years ago. Recent Trends 6. In March, 1977, a party other than Congress formed a Government for the first time since Independence. Undoubtedly, changes in economic policies and emphasis will be formulated in the course of the next few months. The state of the economy was not a prominent election issue; in fact the economy was generally stronger than at any time in the last six years. Although the growth of GDP in 1976/77 is not expected to have exceeded 2%, this was on top of the very good growth of 8.8% in 1975/76. Agricultural production is ex- pected to have fallen by about 3%, but only because of the return to a more normal harvest of 110-114 million tons of foodgrains after the record 121 million tons of the previous year. Industrial growth was around 10% in 1976/77, which is significantly above the rates achieved in the late 1960's and early 1970's. Exports continued their bright performance, rising by 18% in US dol- lars and 12% in volume terms. The overall resource position, with record foreign exchange and foodgrain reserves, is exceptionally strong, and gives the Government considerable room for maneuver. 7. In agriculture the bumper crop of 1975/76 was largely due to remarkably good weather conditions; the good crop in 1976/77 - a foodgrain harvest in the region of 110 million tons would be the second largest on record - was produced under generally normal weather. A conspicuous change was the increase in fertilizer use, which rose by more than 20% over 1975/76, following marked declines in fertilizer prices. Industrial production bene- fited from fewer labor disputes, fuller utilization of installed capacity in both private and public sectors, a more liberal import policy, relatively good power availability, and increased demand because of higher consumer incomes, expanded exports and higher public expenditures. However, whole- sale prices,-which had fallen 14% from September 1974 through March 1976, - 3 - rose 11% from the end of March to December 1976 and continued rising into 1977. It is not yet clear whether this upsurge indicates a new inflationary trend or merely a correction of the previous sharp decline in the relative prices of a range of agricultural commodities. 8. The balance of payments situation has improved dramatically since the 1973-1975 period. In 1975/76 the trade deficit was $1,530 million, which was more than covered by US$1,560 million in net aid, US$205 million in net purchases of currency from the IMF, and US$559 million in net miscellaneous capital and invisibles (mostly private remittances); indeed, this large aggregate net resource inflow led to a US$794 million increase in foreign ex- change reserves, to a level of US$2.2 billion. In 1976/77, the trade deficit is estimated to have fallen by US$1,080 million, due to a rise of US$845 million in exports and also to a fall of US$235 million in imports, primarily because of lower prices and volumes of foodgrains and fertilizer imports. The decreased trade deficit, along with a further increase in the net inflow of miscellaneous capital and invisibles from abroad of US$540 million, more than offset the fall of US$350 million in net aid and the substantial repurchases of currency from the IMF, and allowed a US$1.5 billion addition to reserves, which reached a level of US$3.7 billion at the end of March 1977. Development Prospects 9. The favorable economic situation gives the new Government the op- portunity to address the longer-term constraints on growth. The basic task is to raise the overall rate of growth from its historic range of 3-4%. In the long run this will require raising more resources for investment. But it will also be important to achieve significantly better utilization of avail- able resources, partly through an immediate boost to industrial demand. 10. In agriculture, the basic problem remains that, despite the record foodgrain crop in 1975/76 and the good crop in 1976/77, the long-term growth rate of foodgrain production has been unacceptably low, at about 2.5% per annum over the last seventeen years, and only 2% in the last ten. This has meant that only in good years has there been any margin of production to cater to per capita growth in food consumption, and in normal years it has been necessary to import food. There is considerable scope for stepping up growth both by increasing the use of inputs and by raising the productivity of existing capacity. Three promising developments in regard to the first are the sharply higher outlays on irrigation in the Fifth Plan period along with a renewed determination to complete projects expeditiously; the indica- tions that private investment in tubewells is picking up again after a slow- down in the early 1970's; and the recent recovery of fertilizer demand. With regard to-more productive use of existing capacity, there is increased aware- ness in the Government that the benefits of irrigation projects can be much increased not only through command area development but also through more efficient design and operation of major surface irrigation infrastructure. Also, hopes have been generated for increasing productivity on both irrigated and rainfed farms through a reorganized and improved extension and research system, which has been recently introduced in several States in northern and eastern India. - 4 - 11. A strong effort to raise agricultural growth is essential, not only to meet food requirements, but also because of the pervasive influence of agriculture on the levels of activity in other sectors of the economy. This effort must also be so structured as to increase the incomes of small and marginal farmers, in order to increase production, since they operate 25% of the cultivated land and account for somewhat more than 25% of production, and for welfare reasons, since they make up about 70% of rural population and constitute the majority of those living below the poverty level. 12. The industrial sector is poised for rapid growth, as the most serious constraints on the supply side have been removed by the improved situation with respect to power, coal and imported raw materials and components. There has been a progressive liberalization of controls and the 1976/77 Central Budget announced a reduction of some taxes on private industry. In many cases management of public enterprises has improved, as is reflected in their markedly higher production and profitability as a group. In the medium term it is the demand for industrial output that will determine industrial growth. In certain industries, export demand will provide a strong pull on production; this is true, for example, for iron and steel, certain chemicals, some electrical equipment, processed agricultural products, and vehicles. But the impact of increased exports on overall industrial demand will grow only slowly given the current low share of exports in sales. If the higher growth and productivity in agriculture discussed earlier were to materialize, it would provide a significant stimulus to industry. It is difficult to specify the linkages explicitly; but because of the large share that agri- culture holds in GNP, the coefficients do not have to be large for agricul- tural growth and the concomitant growth in demand for industrially produced inputs and mass consumption goods to boost overall industrial demand signi- ficantly. A higher public deficit and increased public investments are the instruments most directly under Government control, and also those that can increase demand for industrial products most immediately. The interim budget of the new Government moves strongly in this direction with a 240% increase in the planned budget deficit over 1976/77. 13. Improvement in the supply of energy augurs well for India's ability to meet the needs of a more rapidly growing economy. Organization- al and transportation problems in the coal industry have largely been over- come; production is sufficient to meet demand, stocks are comfortable, and the industry has good prospects for meeting both domestic and export demand. Supply of electricity continues to be a concern, because of the vulnerability of hydro power to variations in the monsoon and the continued existence of local shortages, even when the overall power situation is satisfactory. But the severe power supply constraints of the past have been relaxed for the moment at least, and several institutional improvements promise to reduce the future incidence of shortages: underutilization of capacity has been virtually eliminated in well-established power stations; progress has been made in the organized exchange of power between States thus relieving local- ized power shortages; and the problems of slow implementation of power invest- ment due to delayed delivery of materials and equipment have virtually dis- appeared. In addition, the delays caused by the inability of State Electricity Boards to finance projects expeditiously have been eased by their improved financial position following tariff increases, and by increased Plan outlays by the Central Government. The medium-term prospects for the oil and gas sector have been further improved by major new finds of oil and gas near the large offshore Bombay High field. Crude oil from Bombay High was brought to shore for the first time in May 1976; production reached an annual rate of 2 million tons by March 1977, and will rise to a level of 12-13 million tons by 1982/83. Although India will continue to import crude at or somewhat above the current level, much of the foreign exchange burden of rapidly rising imports will be avoided by the development of these resources. Prospects are also bright for further discoveries offshore, given the current high level of exploration activity. 14. Underlying all other development issues is that of population. Al- though India's population growth rate of a little over 2% is not high in com- parison with most LDCs, the size of the absolute increment - 13 million annually - is daunting. It appears, however, that population growth may have passed its peak in the 1960's, and it is expected to continue to slow down, both because the birth rate will continue to decline and because the death rate will not fall as steeply as in the past. With a sustained family planning effort, it should be possible to lower the population growth rate to 1.1% per annum by the end of the century. Our "best guess" projection of India's population by 2000 is 880 million. Many of the benefits of family planning policy will only be felt beyond the turn of the century, but the decline in fertility will bring about an early change in the age structure of the popu- lation. The school age group will grow more slowly or not at all after 1981, thereby reducing the pressures on the primary and secondary education system. The labor force, however, will continue to grow at a fast rate until the end of the century. 15. India's balance of payments position should be comfortable for the next few years. The combination of past global inflation and increased ex- ports have reduced the proportion of export earnings needed for debt service from 30% in 1970/71 to 16% in 1976/77. The ratio is not likely to rise above this level in the next few years. Given continuing favorable policies, the volume of exports should continue to grow by 7% to 10% annually in the near future; and import needs for fertilizer, POL and foodgrains will continue to require a diminishing propor,tion of available foreign exchange. The large inflow of private remittances shows no immediate signs of declining and should continue to bolster the foreign exchange position in the medium term. Imports, including a variety of capital goods, have already been liberalized signifi- cantly. Increased public investment and a revival of the domestic economy is likely to generate substantial additional import demand. However, this should be quite manageable, given the currently comfortable foreign exchange position, bright export prospects, and continuation of the current real level of net aid. The present situation presents an opportunity to raise the level of investment and, consequently, reach a more satisfactory level of long-term growth. - 6 - PART II - BANK GROUP OPERATIONS IN INDIA 16. Since 1949, the Bank Group has made 50 loans and 85 development credits to India totalling US$1,762 million and US$4,338 million (both net of cancellation), respectively. Of these amounts, US$816 million has been repaid, and US$1,432 million was still undisbursed as of May 31, 1977. Annex II contains a summary statement of disbursements as of May 31, 1977, and notes on the execution of ongoing projects. 17. Since 1957, IFC has made 14 commitments in India totalling US$58.4 million, of which US$13.0 million has been repaid, US$7.6 million sold and US$6.9 million cancelled. Of the balance of US$30.9 million, US$24.4 mil- lion represents loans and US$6.5 million equity. A summary statement of IFC operations as of May 31, 1977 is also included in Annex II (page 2). 18. In recent years, the emphasis of Bank Group lending has been on agriculture. The Bank Group has been particularly active in supporting minor irrigation and other on-farm investments through agricultural credit opera- tions. Major irrigation, marketing, seed development, and dairying are other agricultural activities supported by the Bank Group. Also, the Bank Group has been active in financing the expansion of output in the fertilizer sector and, through its sizeable assistance to development finance institutions, in a wide range of geographically scattered medium- and small-scale industrial enterprises. IDA financing of industrial raw materials and components for selected priority sectors has been instrumental in facilitating better capa- city utilization in industry. The Bank Group has also been active in sippor- ting infrastructure development for power, telecommunications, and railways. Family planning, education, water supply development, and urban investments have also received Bank Group support in recent years. 19. The direction of assistance under the Bank/IDA program has been consistent with India's needs and the Government's priorities. The emphasis of the program on agriculture, industry, power, urban development and water supply remains highly relevant. Projects designed to foster agricultural production through the provision of essential inputs such as credit for on-farm investments, command area development of existing irrigation schemes, intensification and streamlining of extension systems, and seed production form an important aspect of the Bank Group's program for the next several years. Special emphasis will be given to projects benefiting small farmers. Projects supporting water supply, sewerage, and urban development also form an integral part of the Bank's lending strategy to India for the next several years. Lending in support of infrastructure and industrial investments will focus on agriculture-, export- and energy-related projects. 20. The need for a substantial net transfer of external resources in support of India's economy has been a recurrent theme of Bank economic re- ports and of the discussions within the India Consortium. Thanks in large part to the response of the aid community, India has successfully adjusted to the changed world price situation. However, the basic need for readily - 7 - usable foreign exchange assistance, to augment domestic resources, assure effective utilization of existing capacity, stimulate investment and accele- rate economic growth, remains. As in the past, Bank Group assistance for projects in India should include, as appropriate, the financing of local expenditures. India imports relatively few capital goods because of the capacity of the domestic capital goods industry. The import component of projects tends to be especially low in such high-priority areas as agricul- ture, education, and family planning. For the Bank Group to be able to make an appropriate contribution to the financing of projects in these sectors, it is important to cover a proportion of local expenditures. 21. It is clear from the review of the Indian economy that as much as possible of India's external capital requirements should be provided on con- cessionary terms. Accordingly, the bulk of the Bank Group assistance to India has been, and should continue to be, provided from IDA. However, the amount of IDA funds that can reasonably be allocated to India remains small in relation to India's needs for external support, and some Bank lending to India, for which the country is creditworthy, is appropriate. As of May 31, 1977, outstanding loans to India totaled US$973 million, of which US$494 million remained to be disbursed, leaving a net amount outstanding of US$479 million. 22. Of the external assistance received by India, the proportion con- tributed by the Bank Group has grown significantly. In 1969/70, the Bank Group accounted for 34% of total commitments, 13% of gross disbursements, and 12% of net disbursements as compared with an estimated 58%, 24% and 29%, respectively, in 1975/76. On March 31, 1976, India's outstanding and disbursed external public debt was US$13.1 billion, of which the Bank Group's 'share was 25%. The Bank Group's share is expected to remain around this level in the future. Because Bank Group assistance to India is predominantly in the form of IDA credits, debt service to the Bank Group will rise slowly. In 1975/76, about 15% of India's total debt service payments were to the Bank Group. PART III - THE OIL AND GAS SECTOR 1/ 23. India's total demand for commercial primary energy has grown at an average annual rate of 6% over the past ten years, but per capita consumption remains very low; it was only 11% of the world average in 1975. India's energy policy is predicated on the maximum economic use of domestic resources, mainly coal. India's total coal reserves are estimated at 83,000 million metric tons, which should be sufficient to cover the country's coal needs for the next 50 years. These reserves are being developed very rapidly; production is projected to increase from the current level of about 100 million tons to 350 million tons by 1990, with a total investment estimated at US$7 billion over 15 years. 1/ India's energy sector was reviewed by the World Bank in 1974 (Volume II of Report No. 402-IN, dated May 7, 1974) and the oil and gas sector in 1976 (Report No. 1172-IN, dated May 11, 1976). - 8 - 24. The share of oil and natural gas in total commercial energy supply grew from 21% in 1965 to 32% in 1973; it has remained constant since, as a result of steps taken to limit consumption after the price increases of 1973- 74. India's petroleum consumption is low and limited for the most part to sectors where other sources of energy cannot be substituted economically, with the result that there is little scope for further reducing demand without constraining economic growth. Thus hydrocarbons (oil and natural gas) are of critical importance to India's development efforts, accounting for about one- third of the total commercial energy supply and for about 25% of the country's import bill. The performance and prospects of the oil and gas sector are a highlight of the Indian economy over the past two years. Major new offshore strikes west of Bombay in the Arabian Sea have led to the delineation of fields with proven and probable recoverable reserves estimated at about 250 million tons of crude oil and about 30 billion cubic meters of natural gas. These fields have more than doubled India's known reserves of crude oil and in- creased the potential availability of natural gas by over 50%. 25. The potential oil-bearing structures offshore Bombay were first identified by seismic survey in 1966, but no exploration took place for almost eight years, since offshore oil was not thought to be competitive with imported supplies at pre-1973 prices. Since 1974, these finds have been developed with striking rapidity. Commercial production from Bombay High, a structure located about 160 km west of Bombay, began in May 1976, slightly over two years from the sinking of the first exploratory well, and reached a level of 40,000 barrels per day (2 million tons per year) by March 1977. In 1976, two more major fields were discovered at Bassein, about 60 km east of Bombay High and virtually on the direct pipeline route to Bombay; produc- tion from the Bassein North field is expected to begin in December 1978, when pipeline transportation facilities are available and the production platform is completed. 26. Responsibility for exploration and development in the Bombay High area has been assigned by the Government to the Oil and Natural Gas Commis- sion (ONGC), a statutory body which was established in 1959. Three other offshore areas are being explored under production-sharing contracts in which ONGC has a working interest: the Kutch Basin by Reading and Bates (U.S.), the Bay of Bengal by Natomas (U.S.), and the Cauvery Basin by Asamera (Canada). ONGC is also responsible for the major share of onshore exploration and deve- lopment. Of the 8.4 million tons of oil produced onshore in 1976/77 (all in the States of Assam and Gujarat), ONGC was responsible for about 63%; Oil India Limited, a joint sector company, for 36%; and Assam Oil Company, a sub- sidiary of the Burmah Oil Company, for about 1%. 27. The development plans for Bombay High and Bassein North call for increasing production from the current level of 2 million metric tons per year (Mmt/y) to 4 Mmt/y by December 1977, and to 10 Mmt/y by December 1981. Onshore, production from known oil fields is expected to increase from 8.4 million tons in 1976/77 to 9.4 million tons in 1980/81. Thus, total avail- ability of domestic crude oil from known fields should increase from almost - 9 - 9 Mmt/y at present to about 19.4 Mmt/y by the end of 1981. Current explora- tion efforts, both offshore and onshore, may well result in the discovery of new fields which could be brought into production in the 1980's. Although another field at Bassein South is expected to contain large amounts of free gas, the development of this field will await the completion of detailed reservoir engineering studies and the construction of facilities to utilize profitably this valuable resource. 28. As a result of the slow growth of the economy and of Government measures to limit consumption of refined products, which was growing at a trend rate of 8-9% in the period before the oil crisis, consumption of petro- leum products declined from 22.5 million tons in 1973 to 21.8 million tons in 1974. It grew by about 3% in 1975/76 and by 6-7% in 1976/77 to about 24 mil- lion tons. The volume of petroleum imports declined from almost 18 million tons of crude equivalent 1/ in 1973/74 to about 17.4 million tons in 1974/75, 16.2 million tons in 1975/76, and 16.9 million tons in 1976/77. The import bill rose from US$719 million in 1973/74 (compared with US$265 million in 1972/73) to US$1,451 million in 1974/75 and an estimated US$1,627 million in 1976/77. 29. Even with a low rate of overall economic growth in India, consump- tion of petroleum products will exceed the combined production of existing onshore fields, Bombay High, and Bassein North, which is expected to peak at about 26.5 million tons in 1985. If overall growth were to increase to, say, 6% per annum, the annual growth in consumption of petroleum products could easily rise again to 9%; this would involve the consumption of about 50 mil- lion tons of crude equivalent by 1985, with imports of some 23.5 million tons (valued at US$2.3 billion at present oil prices), in spite of the projected rapid increase in domestic production. 30. As warranted by the highly profitable investment opportunities and large unexplored prospective areas which currently exist, exploration and development programs have been sharply stepped up, and the oil and gas sector has taken an increasing proportion of Plan outlays. Total expenditures for exploration, development and refining included in the Fifth Five-Year Plan (1974/75 - 1978/79) are Rs 16.9 billion, or 4.3% of total Plan outlay. Of this amount, ONGC was to get Rs 10.6 billion, or 62%, but this is very likely to be exceeded -- perhaps by 50% or more. It is too early to determine the extent to which the Bombay High project will affect the share of ONGC, or of the oil and gas sector as a whole, in total Plan expenditures, since this depends on evolving needs in the sector as well as other developments in the economy. However, it is likely that the proportion of total Plan expenditure allocated to ONGC alone will rise from under 2% in 1974/75 to over 5% in the last two years of the Plan period. 31. India's policies with respect to the development of the oil and gas sector changed from an almost total reliance on foreign oil companies after 1/ Crude oil imported as such and refined products expressed in the quantity of crude required to produce them. - 10 - Independence to a strong emphasis on self-reliance until the oil crisis of 1973-74. Recently, India has followed a policy which, while it continues to stress national autonomy, has increased cooperation with foreign oil companies. Negotiations with a view to acquiring the assets of foreign companies in India have been successful, and settlements have been reached in all cases. The Government now owns more than 85% of total refining capacity in India and has a controlling interest in the remainder. Although ONGC has become India's principal organization for exploration for and development of hydrocarbons, its pragmatic attitude toward foreign expertise is indicated by the production- sharing contracts mentioned in para 26 above and by its regular use of foreign consultants (para 41). 32. The proposed project would be the Bank Group's first lending opera- tion in the Indian petroleum sector. However, the Bank Group has been in- volved in the energy sector since 1950. The Bank Group has made 17 loans and credits totalling US$749.1 million for power generation and transmission and two loans totalling US$47.4 million for coal production. At the request of ONGC, the Bank's initial involvement in this sector -- in the preparation of terms of reference for studies of the utilization of natural gas -- has been extended to an association with every critical step in the preparation of the proposed project. ONGC's field for further expansion, particularly offshore, is wide open, and, through the proposed project, the Bank will continue to advise ONGC regarding its expansion program, including project evaluation methods and the marshalling of the large financial resources required for the future development of the sector. PART IV - THE PROJECT 33. The proposed project was appraised by a mission which visited India in January/February 1977. The appraisal report (No. P-1569a-IN, dated June 10, 1977) is being distributed separately to the Executive Directors. Negotiations were held in Washington in May 1977. The Borrower was represented by Mr. B.B. Vohra of the Ministry of Petroleum and Mr. Vineet Nayyar of the Ministry of Finance, and ONGC by Mr. N.B. Prasad, Chairman, and Mr. P.T. Venugopal, Member (Finance). Project Description 34. The proposed project is the third phase of ONGC's development pro- gram for the Bombay High offshore area (including Bassein North) and consists of the construction of facilities required to produce up to 140,000 barrels per3day (b/d) (7 Mmt/y) of crude oil and 2.2 million cubic meters per day (Mm Id) of associated natural gas, and to process, transport, store and deliver to users the oil and natural gas expected to be available from these fields at full production (240-260,000 b/d). The principal components include: about 20 additional development wells, about 5 well platforms, three production plat- forms equipped with processing and pumping facilities, two subsea pipelines to shore, an onshore terminal including gas and oil processing and storage facilities, supply lines to the users of the oil and gas, a supply base for - 11 - ONGC's offshore operations, a telecommunications system, and consulting services. The project is expected to begin in the Fall of 1977 and to be completed by May 1979. The pipelines and supply lines are scheduled for completion by May 1978, before the start of the monsoon. This schedule is tight but manageable. 35. Bombay High crude is temporarily being transported to shore by tanker, using a single-buoy mooring system. Although this system is capable of transporting up to 80,000 barrels per day of oil, it has two major draw- backs: the associated natural gas must be flared offshore, and the system cannot operate during the extreme weather conditions which prevail during the monsoon period (June - October), requiring shut-down of the entire field. Moreover, production capability is expected to exceed the capacity of the existing transportation system after December 1977. 36. The crude oil produced by Bombay High and Bassein North will be substituted for imported supplies to domestic refineries. Because of the technical characteristics of the Bombay High crude, some modifications are required at existing refineries. The two major refineries at Trombay, which are the first concerned, have already completed most of the necessary adjust- ments, and other refineries will complete them during the project implementa- tion period. Any delay in refinery modification would not have adverse effects on the project, as the crude oil could be easily exported at international prices. The associated gas will be used as feedstock in the Trombay fertilizer complex of the Fertilizer Corporation of India, where the necessary modifica- tions are being undertaken. Liquefied petroleum gas (LPG) will be bottled at the Trombay refineries, where facilities exist for handling and storage, and sold for domestic and commercial use. Studies concerning the possible utili- zation of additional associated gas which may become available and free gas at Bassein South are underway with the assistance of consultants (Stone and Webster, U.S.). Project Cost and Financing 37. The project cost, including contingencies (US$112 million), is estimated at US$571 million, of which US$417 million, or 73%, represents foreign exchange costs. Taxes and duties account for about US$12 million of the total. 38. The proposed loan would provide 26% of the total project cost and 36% of the foreign exchange costs. In addition, the Government has indicated its intention to borrow about US$50 million from commercial banks toward the financing of the project and to utilize official bilateral aid to the extent it is available for use in a manner consistent with optimal project implemen- tation. GOI representatives estimate that US$50-100 million in bilateral aid may be available for the project from countries including Japan, France, Germany and the U.K. About US$100 million is expected to be available from ONGC's internal resources and about US$70 million in loans from India's Oil Industry Development Board over the next two years; The balance would be made available by the Government from its own resources. The Government has under- taken to cover promptly all of ONGC's financing requirements, including its working capital requirements (Section 3.02 of Loan Agreement). - 12 - Procurement and Disbursement 39. The goods and services financed under the proposed loan would be procured in accordance with the Bank's guidelines. All contracts would be awarded on the basis of international competitive bidding, except that, sub- ject to prior approval of the Bank, items with limited sources of availability, whose timely supply is critical to efficient project execution and which are estimated to cost US$2 million or less, may be procured on the basis of quo- tations from short lists of suppliers, provided that the aggregate value of such contracts does not exceed US$7.5 million. The proceeds of the loan would be disbursed against 100% of the c.i.f. cost of construction of the subsea pipelines (US$70 million) fabrication and erection of two well platforms and one processing platform at Bassein North and of one processing platform in the northern part of the Bombay High field (US$65 million), and construction and equipment of the gas fractionating plant (US$10 million). US$5 million would be unallocated. The contracts against which the loan proceeds would be dis- bursed were selected on the basis of their suitability for international compe- titive bidding and their timing (i.e., items for which tenders had been issued without prior Bank review were excluded). ONGC's normal procurement procedure for foreign supplies requires worldwide bidding similar to the Bank's proce- dures; it is expected that this procedure will be applied for imported equip- ment and services not financed from the proceeds of the Bank loan. Project Implementation 40. ONGC is responsible for project implementation. The Commission, which was established by an Act of Parliament in 1959, consists of a Chair- man and not less than two nor more than eight members appointed by the Gov- ernment. At the present time, there are four full-time members (Exploration, Production, Finance and Materials), and two part-time members (Secretary (Economic Affairs), Ministry of Finance, and Secretary (Petroleum), Ministry of Petroleum). As of January 1977, ONGC's total staff was 23,000, including 1,500 engineers and technicians. ONGC's administrative and financial func- tions are centralized in the corporate headquarters at Dehra Dun; its opera- tional staff is divided among three Regional offices and the Bombay High Development Project (BHDP), whose headquarters are in Bombay. The staff of BHDP, which was created in 1973/74, is now about 600 people, mostly engineers and technicians. 41. The BHDP staff are experienced and technically competent in off- shore oil and gas development. In addition, consultants have been employed for the design and engineering of most of the project facilities: Pipeline Technologists (U.K.) for the pipelines and supply lines; Engineers India Ltd., in collaboration with Crest Engineering (U.S.), for the production/processing platforms; Peter Fraenkel and Partners (U.K.) for the supply base; and Burmah Oil Engineering (U.K.), in collaboration with the Post and Telegraph Department of the Ministry of Communications and the Telecommunications Branch of the Ministry of Defense, for the telecommunication system. Engineering consul- tants for design and supervision of construction of the onshore processing/ storage terminal have been nominated. ONGC has agreed to take all action - 13 - necessary to acquire as and when needed the land and rights of way required for construction of the project facilities (Section 2.10 of Project Agreement); the necessary legal formalities are well underway, and ONGC can begin con- struction prior to the completion of these formalities. 42. Although ONGC has been remarkably successful in developing the Bombay High field, ONGC management recognizes the need to improve BHDP's capabilities to handle a project which is far larger and more complex than what has been done so far. Accordingly, ONGC is transferring experienced personnel from onshore operations to the project staff and is hiring addi- tional qualified engineers. The Commission has also appointed a Project Manager and sub-project managers, and is in the process of appointing consul- tants to assist in the establishment of appropriate management procedures for the implementation of the project. ONGC has agreed to establish a satisfactory management information system for the Bombay High project by December 31, 1977 (Section 2.06 of Project Agreement); this would be one of the first tasks of the project management consultants. ONGC has undertaken a program to meet additional staff training needs, which the Bank has reviewed and found satis- factory. ONGC has also agreed to submit to the Bank an updated development plan of the Bombay High and North Bassein fields by the end of each calendar year starting in 1977 (Section 2.05 of Project Agreement). 43. All necessary precautions will be taken during design and construc- tion of the project to minimize the ecological hazards associated with the production facilities, pipelines and the offshore and terminal facilities. ONGC is procuring a vessel outfitted for offshore fire-fighting and oil spill clean-up, and the Indian Coast Guard service will assist in any offshore oil emergency. All manned platforms will be equipped for fire-fighting and with emergency escape and survival systems, and the North Sea safety regulations will be adopted during construction. ONGC Finances 44. ONGC's financing requirements which are not met from internal cash generation are provided as follows: exploration expenditures through equity contributions from the Government, and development expenditures through loans, primarily from the Government (at 10-1/4% interest for 10 years including 4 years' grace) and the Oil Industry Development Board (at 4.5% interest for 15 years including 2 years' grace). An exception to this rule is Bombay High development, for which 50% of the financing required is provided in the form of equity. The Government sets prices for crude oil and natural gas at a level which enables ONGC to cover its operating costs, including depreciation, to service its debt and to finance a reasonable share of its development program. 45. ONGC's production of crude oil increased at an average rate of 12.5% per annum over the period 1973/74 - 1976/77; together with an increase in the price it received for crude oil, this led to an increase in revenues from Rs 816 million (US$90.6 million) to an estimated Rs 1,450 million (US$161 million) over the same period. ONGC's cash generation enabled it to finance - 14 - about 49% of its capital investment requirements, including those of Bombay High, after meeting its debt service and its need for additional working capital, in the four-year period. 46. The prospects arising out of India's first major offshore dis- covery open a new era for ONGC in which its capital expenditures and cash flow requirements will increase considerably. On the basis of present prices and conservative estimates of production from existing onshore and offshore fields, ONGC's revenues are also expected to rise as can be seen in the table below, from Rs 1,941 million (US$216 million) in 1977/78 to Rs 6,082 million (US$675 million) in 1981/82. The annual rate of return after taxes on average invested capital is projected to average about 12% after completion of the project, and ONGC is expected to be able to finance about 57% of its capital investment requirements from internal cash generation. Over the period 1977/78 - 1981/82, ONGC's debt/equity ratio is projected to be not more than 42/58. Thus, ONGC's overall financial situation, including its liquidity and its debt management, has been and is expected to remain sound. Years ending March 31 Crude oil production (Mmt) 7.3 10.2 13.3 16.5 18.5 Revenues - Rs millions 1,941 2,991 3,979 5,351 6,082 Operating Income After Taxes 168 564 1,030 1,986 1,766 Operating ratio - % 91 81 74 63 71 Rate of return on average invested capital - % /a 2.5 5.8 8.4 14.1 11.7 Rate of return on average net fixed assets - % 4.7 9.3 11.4 18.8 15.5 Debt/Equity ratio 42/58 42/58 41/59 34/66 29/71 Debt service coverage times 2.7 3.4 3.8 4.5 4.0 47. Consumer prices for petroleum products in India have been set, with few exceptions, above international prices and fully reflect the scarcity value of petroleum. The producer price set by the Government is the main parameter in ensuring that ONGC's profitability and cash flow objectives are met. Accordingly, ONGC has agreed that it will prepare and furnish each year to the Government an economic and financial evaluation of the project and of any subsequent major development, which will indicate the price levels required for ONGC to earn a discounted cash flow (DCF) financial return of at least 15% after taxes on the project and on any subsequent major development. The GOI has agreed that it will review, on the basis of this report, the price of oil and gas produced by ONGC with a view to determine the price levels needed to enable ONGC, under conditions of efficient operation, to meet its operating expenses and earn a return on its invested capital sufficient to cover its debt service requirements, maintain adequate working capital and finance a substantial portion of its proposed capital expansion. (Section 4.03 of Project Agreement and Section 4.02 of Loan Agreement). ONGC will have its accounts and financial statements audited by an independent auditor and will submit these to the Bank. (Section 4.02 of the Project Agreement). - 15 - 48. The Government has established well-head prices to ONGC of US$5/ barrel of offshore crude oil, US$55/thousand cubic meters for natural gas, and US$90/ton for liquid petroleum gas (LPG). The DCF financial rate of return of the project, at these prices, is projected to be 19.8%. Thus, the current price of US$5/barrel is adequate to cover production and explora- tion costs and to generate a reasonable profit to ONGC after taxes. Project Benefits and Risks 49. Using the prices established by the Government for gas, which are comparable to international prices, and the present international price of US$13/barrel for crude oil, the proposed Bombay High Development Program yields an economic rate of return of about 66%. This result is less sensitive to variations in costs than to delays in implementation; thus, a 20% cost in- crease would bring the return to 56%, while a one-year delay would bring it to 50%, which is still quite satisfactory. 50. The risks normally associated with hydrocarbon development projects are compounded for offshore ventures by weather conditions. However, over the years the industry has developed techniques and technologies which, if they do not eliminate risks, reduce them to an acceptable level. The tech- nical solutions selected by ONGC have been proved reliable, and ONGC's con- sultants and contractors have considerable experience in the design and construction of offshore and onshore facilities. ONGC's staff is qualified and experienced in all the facets of oil and gas production, processing and utilization and, therefore, the risk of errors in design and/or operation is minimal. Weather conditions, however, are not predictable and may cause delays despite the precautions taken to avoid major construction work off- shore during the monsoon. 51. There is also a risk that the fields will not live up to ONGC's expectations. It is impossible to fully predict the behavior of a reservoir, and fields have been known to "dry up" much sooner than expected. ONGC has been careful and conservative in its approach to the evaluation of the fields and has used experienced consultants to assess both the reserves and the production mechanisms. All estimates are consistent and show that the fields should eventually produce more than was anticipated originally. Continuous monitoring by ONGC, assisted by reservoir engineering consultants, of the behavior of the reservoirs will provide sufficiently advanced warning of any problems for ONGC to take remedial actions. As part of the appraisal, the Bank engaged an independent firm of reservoir engineering consultants (De Golyer and MacNaughton), whose opinion fully confirms ONGC's estimates of reserves and proposed development program. PART V - LEGAL INSTRUMENTS AND AUTHORITY 52. The draft Loan Agreement between India and the Bank, the draft Project Agreement between the Bank and ONGC, the Recommendation of the Committee provided for in Article III, Section 4(iii) of the Articles of - 16 - Agreement and the text of a draft Resolution approving the proposed loan are being distributed to the Executive Directors separately. 53. Special conditions of the Project are listed in Section III of Annex III. 54. I am satisfied that the proposed loan would comply with the Articles of Agreement of the Bank. PART VI - RECOMMENDATIONS 55. I recommend that the Executive Directors approved the proposed loan. Robert S. McNamara President June 20, 1977 ANNEX T Page I f 4 1MJ * SOCIAtL INDICATORS DATA StECT L AND ARNA (THOU 1. . . ........ RI..* E 5 (.I.9.*.0.) ....... IOIDIA, REFERENCE COUN.TRIES (90 ?OTAL 3280. MOST RECET AQTC 1780,7 1960 1970 ES TITAT INDONESrA PHILIPPINEA BRAZIL GNP PER CAPITA (0U5) 70.0 1710.0 150,0 1. 7.0 23J,o 5-- .0 ........ ........................- POPULATION AND VITAL STATISTICS 'OPUL4T104 (bID*PV. MILLtON41 934.0 94,.6 605.1 116.3 36.9 92., PER SQUARE ~~~~M 133.0 167,0 1S5.0 61.0 123.0 11.0 PER IS '40CULTURAL LAND 152.0 30°.0 33o.0 411.0 279.0 o6.0 VITAL SrTyISTICS CRUDE BIRTH RATE TWOU. A) 31. 41,0 37,0 91.9 4a.2 38.4 CRUODeIATh RAVTit(/TWOUOAV) 139 I9,0 17,0 30,6 13.2 9.9 INFANT 9ORTALITY WrtC (ITWOU) 139.0 L/ 130,0 ,, S0.0 110.0 LIFE. PgEJCNNCA v At S1RTM (pR$) 41.? 4ot, 49,S 45C 55.6 59.7 GROSS EP9ROSUCTION RATE 3.1 l. - 1.8 3.2 3.3 2,6 POPULAYIOI GROWTH RATE (81 TOTAL, 2.0 . 2 1:0 3,0 29 UNRAN 2.L 3b . 3.1 1 , I 4A0 5s0 URBAN POPuLATION 11 OF TOTAL) 17.9 19., 20.6 17.2S5 b 27., 56.0 AGE STRUCTURE (PeRcERrj 0 TO 14 YEARS 9t.0 a1. 40,9 j 44,0 40,. 42,0 15 TO 64 YEARS 59 13 54.9 53. 51,6 55.0 68 YEIAS AND OVER 8.1 3.1 3.2 2. 2.9 3.0 AGE DEPENDENCY RATIO 0.8 0.8 0.8 0.9 0.9 n"8 ECONOMIC oEPENDENCY RATIO 1.1 /c 1.1 /a 1.lLb 1.5 2.5 FAMILY PLANbIN4 ACttORS (CUtULALTIAC, TOOU) 71.0 14985.0 37618.0 259.3 354.o 250.0 USRS (W OF MARRIED wO4EN) .. .. 18.7 ,, 2.0 (.6 E PLDVME NT *. TOTAL LABOR 'nFRCE (TWOUSANoD 175000,0 21SODO.o 248000.0 Ic ,, 12300.0 791.00.0 LABOR PORCE IN AGRICULTuRE (81 71.0 69,0 68.0 , S s5.0 /a 4AO JNEMPLOYED (1 OP LABO9 FnRCE) 1.0 /d .. 1.7 ,, 7.0 INCOME DOBTRIUJIION I ot PRIVATE INCOME REC' o r- R1CHEST 51 01 HOOSEHOLDS 26.7 25.0 /b ,, ,, .. 5.1 Ia MIGHeST 201 OF HOUSEHOLDS 5I 7 53t. 76 . . . 02., 2 7T LOVEST 201 OP OUSHOLDS 9,1 4.7 77 ,, . ),o 7- LONST 401 OP HOUSIENOLDSI 1.6 13.1 7 7 1 .0a DISTRIBUTION OF LAND OwNERIMIP .... TO.FE.. ................... 8 OWNED Sr TSMLLP 10 OcOERS ., .. .. . . 45 ' t OWHCO S S04LL'1'TOF vo O.NERS , , ,, , MCALTH AND NUTRTTION OPULATION PER PHYSOCOAN 5840 .0j 49890.0 422200 26370,0 ,, IQ0,r POPULATIoN PER NURSING PERSON 331W) oJ 5220,0 368040 jI 7630 o I22c /b "OPULATION PER MnSPITAL RED 290 .0h 16100 ,, I6400 o 50sn 200.r, OCR CAPITA SUPPLY Of- CALORIES (I OF REOJIREM4ENTS 9 95.0 93.0 994,0L 91,0 100,0 109. PROtEIN (GRAMS PER DAY) 55.0 53.0 52 ,0i /3,o 4 u5, 0 i OP WHZICH ANIMAL AND PULSE 19.0 16.0 ,, 14.0 22.0o 34, DSETH RATF 12THOU) AlES 1.4 49.0 . .9 ED'JCATION DJUSTEo ENROLLMENT RAT16 PRIMA;R SCHOOL 380 680 79o/a 9,0 10,o0 o7 0 SECONDARY SCHOOL '0is. 280 9 10 4880 2 n0 YEARS OF sCHODLING PROVIDED (FIRST iND SECOND LEVEL) 12.0 12.0 11,0 12,0 10.0 13.r VOCATIONAL ENROLLMENT (1 IO SECONDAR) 8.0 6,0 .0 290 6.0 /b IT7. ADULT LITERACY A RAT 111 24,0 37,0 36.0 LO f 59o ° , b.n MOUS1NG *C9SONS PER ROOM (URBAN) 2.6 ,, 2,8 ,, 2.1 1.0 OCCUPIED DWELLINGS WITHOUT PIPED WATER (8) 76.0 73.0 /c ACCESS TO ELECTRICITY", (8 OF ALL DWELLINGS) 23.0 48,0 RURAL DEELLINGS CONNECTED TO ELECTRICITY (8) ,, ,, ,, ,, 7.0 8.0 CONSUMPTION RADIO RECEIVERS C(ER THOU PoP) 5.0 21.0 24.0 114,0 45,U 60b0 PASSENGER CARS (PER T4nu POP) 0,7 1,0 o.0 2.0o 80 25,0 ELECTRICITY IKWMI/R PIR CAP) 46.0 l1i.0 129.0 20.0 235,o 491 0 NEWSPRINT (KGjYR PER CAP) o0. 0,3 0o3 0,3 2.0 2.7 SE....................................................................R ANNEX I Page 2 of 4 NOTES Inen ohrwsented, data for 1960 refer to any Year betwee 1959 and 1961, for 1970 between 1968 and 1970 and for Most Recen.t Entioate betee 19 73 ad 1975. -n Brse il has been Se.tarrd as an objective t...try hee...e. of it-c aitn and e-par.bin preblena of regional ieeqnality. INDIA 1960 I 1951-61 ovrage; /b 1951-60 /c Ratio of popaietion onder 15 and 65 end ovr to Iebor force age 15 and evr, _____ __ ~/d Registered applican.ts for work /e 1962, /f Regiatrerd, noat oil pra.ttinig in the toontry. /g Including nidwivee I /h 1958, /I 1960-62. 1970 / Ratio of popalation onder 15 and 65 sed over to lahar feree age i and over /h 1967-68; /c Intluding ndivn /d 1967. MOST -RECENT tSTISI2ATE /0 1971: Lb Ratin of Popoletien seder IS and 65 and ove to labor force age 15 and ovr; Ic 1976, Id Including nidWive; /e 1969-71 avrage; If Popoltaion 15 yearn andovr iNDONESlA 1970 / 1961-71; /6 1971; /n including nidwive; /d Total boepital beds incoeplete. PHILIP'PINES 1970 IA.a prertentge of eploynsnt, lb Not including private vocationl eeos BRA/AL 1970 /a tonaically acive popolation; lb Hospital personnel. /e Inaide only. lID, April 16, 1977 DEFINITIONSD OF SOCIAL INDICATORS I ed Arca (then km Popalation per sor.ine pernon - Popolotilon divided by noebor cif practi- !o)La - rciai se.rae -rv iompr isito land arca and inland waes icg main and fea1e grad.oat norst, " trained " nr "certI~fied" A0- r:e -Mo r..c t en.n.. .I arc o al rea toed Lecpornrily o e-ran. and ...ni1iiry prr.nene iatti training or cnpnrivn..c. -emavelyfo tevp, ontvca naIket 6 hitchen gardeno nr to lio Popolation pnr heopital bed - Popvlatinn dimtdcd by nombor of hvspttcl fat Ivo. ~~~~~~~~~~~~~~bedo -niltble in pobli.eand primate ien-rl ond operca.ited hvnpital and rnhbsblitation centers; noclodcc noraiog honco and entablinhonets il' rrcait (US$) GNlP pcr capi to ae a trorent tarkbet priens, for cs tndIal and pr-evtLi- metoe. -l-laied by navi e-co.rosn scihed as ored Ionic Atlan (1973-75 basin); Per e.pita nuply nf oeic(7. of reoutrements) - CompiLed fr.n 'cCo, 1970 nc 1975 data. energy eqoimalent of net fnod copploen 1 ailalrl in ..contry per nopita per day; avatdiahin~l aopie oprin donetc prcldvrrtcn,iprsln 'coeloi,vnamdcetal statestecs napor~~~~ ~~~~~t,anosen in stck; not sopiarcoes In iced, srnd, Pcelvicn id-r. illon)- A. ciJuly first: if o aila,ble, qoastittes .asd in food preteentis and dossi d itebotion,reot- a-crg i too end-year t rsisei 1960, 1970 and 1971 data. nents -ern esti.otd hy FAD hon..d on phyo iclvgical seneds for norma an.tintry,and bos1tib -cmidn,,ric oiv,en teperaturo, body -eghtc, ,Peylati... deenity - "ers I,r Ice-iid-ye-r population pnr oqeore buno- ageend scditrthotico ci .poplation, and a11octng 157 . ircaL nit- (111 ieLr)cI total -rco at boaeicod IoneI. Pocltin ooitn -or ovoar kno nrc lcnd - Comp.ted as shoe I-r Perteacita seplmnf protoeo (croo cot doe) - rctcin content of p-r 1-:oivo ad yelp. cpitLa ne ssppo odprdy, vet anpyly of food in drfi-oda he,rqciron--- oral nt oontrion eotahiiabed by USDA Einoneip ~tiol 0 OtOii - esnrti ereirn proide feraoneoI lloanc c o 61 grams of Cindy bitrhi rate p-r ihoenod, ae-raon Atnnul love births yet thi...nand total proteni per day, -nd 20 graic of animal and Polne0 prtecn, of ci mid-yroc polteen tee-oo oritbm-tic -veragn- ending in1960 and ohnrh II grama shooId ice oninol protein, these sLodar do arc 1cc- 197. ad sie-poraveoi ending in 1975 forms rcn ntsrn tica ticccf.. usaaO taLc. pro,int and 23 Iron ci aninol prti 12' od, 1:h dcotb pot ncr uiioad, ceotAn... Ideaths per the..s.nd of eld- a ao -rage for tbc world, Propsed icy FAO in Lice Third acrid rood year popolrton. tens-year aritlonotic -voragen ending is 1960 and 1970 an SoreY. i:v-pyara.r... Se ndin6 in 1979 for moat recent nIinate. Per melits Protein soeply fom snoma1 and poise - Protein sopply of fend Jnfan -criality rate 1/thcco) _-Annoal deaths o iInifants ondor onye-p derived iron aninain andfpalno in iramo Per day. vf agc prr thi.....d lIne- iirtho. Death rtat (/thoa) agei 1-4 - Ansca l d-thb per thi....od in age g ...ep Iif~ ciceectnce at birth fern) -, Aetog tobe fy Y..ra of lii eroaie- i-ic years i.te children In thin age frvop, noggcoLcd as an iedtc-t- of -eo ati,rIh, -ovoeIInnper-n-g-i cndit In 1960, 1970 ned al -trio. 1975 icr dne-vptngc-entrn. -.rc-pccrdocttcnrace- Aeerafntnmber ci lint dsoiihternoen..ano ill Education bearto brvenol eyrd-esnycedi _eon irnees prnot age- Adjonted ..rcilnen,t ra'tio I - .pinay arhnl - E.r.iln-nt of all 0000 00 opo-ifee fertility raes sI iy-ie-er gera- ending In i960, perrentogeofpe nry iotanppoatc nldc hlrnac 1970 and 1975 icr dcvelop-o ...ontri- 6 -li pe-ra ban odjuted for different iengt~icn f Pr imary odnia.tion, .Pnpoit-- Erocthc rotc 17.) - tOLd1 - Conynond onnocl groath rates of nid- for coontrins with - -n1no odc..aticn, eero11lnnt may enreed tIlT pear "popoL-to for 1950-60, 1960-70 and 1970-75. nin-e some popLins. - cc onj - above thct official .c.1n ago. Pocltb threi rate 7. orb-n-iCmpcted likbe gr-eth rate of total Adicated enrollment rati -st-nndory ociconi - Ccnyatnd at bicc, peycatis, effronidoieitin f -i rin ncro ray offecti ...para- seconday Id..ati-n r-qeiree t les fvur yearn of approed primary Iiiyofdt aIer trn.tntrctiont, pr-id-s gnnero1, ecoin..olIor techeicr trInIing Irican popalaic- (7. of Itot1i - buyi of crb-a Lc ,totl popo1ation; onstrottiese fee popLin of 12 to 17 yoars of ago, crrenpoed-nco di.fret.. fi... n nf .r.c .r..n na.y ofiect ennpsraoility of data ccuraes ar e gnnerally enclo ded. oec.f euontr, inYeors of nchenltng pr-midod (first and ...c.nd 1ee1i) - Total year ci Agi otructre I prrcent) -,Children (I-lb y-orn, anricig-age 115-hi y-or), sthecling; at oncondary le-1, vo-tin..al inotroction nay ice par- an- rtie (65 yearn~ an Ic-)-anp -rntagns. of mid-yea Ipopolo-on. tsally, or -plotecly -ocluded. Ago deceod- ecY.ratio . tto of Pcyalt-tineder iS end 65 and -eer to Dnatiosai esro llect A7 ci nectdory) - VD.cattia . oo. tuicI tone f aon1 iicgi 4 inclode tecbhnical, indo-tre1 or other prcgran chith nperaLn -toni dep-end ny raIn- taic ci pvpulat-counder lb and 65 cnd -mer Inde~pendeotlY or as dcpat-mesi f ...oe.cdary inItstooIn. to Lice labor force in age grccp of 15-64 years. Adalt i lteroce rate (7.) - L iterate adu ltn(able read and trite) as Family pla. nnn _ - anetro cmcanm,thee) - Coenlonime ounbe ef porcenrage of ntotl adolt Popolatien aged 15 yearn and neer. ,ccePtmen of birthic-cotrol denleen coder -cpi-e ci estio...l family pl . anne p,.rc_a nioIn_'ce ption. on F-mly plaentsg - onern (7. ci nrrlnd woe)-Percentages of maried PrcnPer room (orban) - A-erg.n-saicr ef peroons Per root iv wome fci cIctl-knaremo ago (I5-44 yo.ars) abe one hirth-cotro1 d-i...s -cupind ione-nti.nnI danllinga tnrbc ren daetltsgn e-eudc toal carred c.nen innae c6e gry.to-p er.neset struetores and cOcicopitd parts. Oce..pied dweling cttbot pipe cater (7. - Occopied n-n-nticca. Enplvyneet dwellings in -rhoniand ruralareas withnut i-ide or ecteide piped Total labocr ifr- (thmutand) - Econcnieally ctie- persona, including etrfacilities as p-recLage of a'lt ccupicd d-elllngs. and forces and unonpIyed hot enelodtn onsea tdsn r Access t.e lentritity (7 of all doeling Coscn-tiona1 d-lliega definiticns is ear icon ccnt en are oct coeporable. nubh electricity In lti-g qoartera as percent cf Itetl d-llinga ns Labor forne Is Atricultare A7) -Agrtcutu iral labor force (in foreleg, urba nd rotrat area.. forentry, banting and it,nicni as yerent,ge of total labor fore.Rara1 dweliis0a ccornn ted ticlectricitY (7.) - ComPutnd an ab.c fcr inoneloyed (7. of labor for-) - Ucep loynd ae ailtYdefinedf.an rural danllings only. persons w.ho are Iable an,d.nilling to take a jnh, cot nf aJob cc a gtne dy,-rmoedfctciaJob, and nek Iing work for pacieefied CoensPin-io miotno period noat nca ned one .eek; nay not he tamparable betones Radio r-timer (per thcco per) - All types of retelnern fcr radio broad- aonre n od ntosidefi nitions I fnampoynd adslcart of cato to gennral poblii per thuc.s.nd of Poyc1atios; cocloden data, e.g., eni etofienaite, ap s e, conyciscry oslItensed receim-rs inecountrinn and in yearn hben e.gintratice of ountplcyoest insarance. radio sets .at ie effect; data f.r recent years nay nct ho coops..ablo mItre. D-strlhoticn - Percentage ci priete i.cce- (botb to cash and Pseatnrn(e hcpop) - Posseegor cara nenpr io ectar carea kind) rocein!.ed by richest 57., richest 207., p.ocret 207., and poorest seating lese ta.n eighct per.noc, -nclodno ambolante, hnanes and 41.c cceod. mliitarp enhitlen. Ile,trcity (khb/er per eap),- A-sca rnnscmptill of indoetrie1, con- Dintribotion ef land oonrsiic -Perceetages of land cwnnd by -1thrieat nectaL..jt bl and primat ee innrni-ty is kilo-tit boats per capita; 117. and P0oret 107. of lsnd soen.onerolly-hse anpdotins data, ithoct alown or icesen in grids hot al-lowng for inpcrtnsod espnrts of electroity. Htealth and Nutrrition ttewacrint (ka/er Per cap) - Per .tpit. annuaal -ceinti-o in kiltigrams Popolatie per physician - lopalcti-n dinided by nbamio of practicing natinated iron d..neatic prodocticn pins net isportt of newsprint. phyaictasna qoalified firon a medicol snchol at uni-ersity 1enD. ANNEX I Page 3 of 4 BCONOMIC DEVELOPMENT DATA GRP PER CAPITA IF 1975 USS 150 GROSS NATIONAL PRODUCT IN 1975/76 ANNUAL BATE OF GROWTH N. oonstant prices) USS Bln. j 1960/61-1964/65 1965/66-1969/70 1970/71-1974/7S GNP at larket Prices 82.8 100.0 3.8 3.7 2.6 Gross Domestio Investment q6.7 20.1 Gross National Saving 16.0 19.3 Current Account Balance -0.7 -0.8 Resource Gap -1.5 -1.8 OUTPUT, LABOR FORCE AND PRODUCTIVITY IN 1971 Value Added (at factor cost) Labor Force V.A. Per Worker US$ Bln. SE MiUS % Of National Average Agriculture 24.5 46.6 130.0 72.1 188 64 Industry 11.8 22.3 20.2 11.2 582 199 Services 16.3 3,.1 302 16.7 S2 186 Total/average 52.6 100.0 180.4 100.0 292 100 GOVERNMENT FINANCE General Government A Central Government Bln) 5 of GlP (RE Bla) E of GDP 1975/76 1975/76 1973574-1975/76 1975/76 1975/76 1973/74-1975/76 Current Receipts 133.34 18.5 16.7 79.11 11.0 9.8 Current Expenditures 118.77 16.5 15.- 70.05 9-7 8.8 Current Surplus/Deficit 14.57 2.0 1.4 9.o6 1.3 1.0 Capital Expenditures s/ 54-27 7.5 6.2 40.75 5.6 4.6 External Assistance (net) 13.89 1.9 1.3 13.89 1.9 1.3 MONEY. CREDIT AND PRICES 1965/66 1971/72 1972/73 1973/74 1974/75 1975/76 September 1975 September 1976 (Billion Rs outstanding at end of period) Money and Quasi Money 61.4 122.4 142.2 169.1 187.2 213.6 199.0 238.3 Bank Credit to Public Sector 40.8 69.0 82.5 92.9 102.6 108.5 112.8 112.7 Bank Credit to Private Sector 28.1 64.4 76.o 90.1 109.5 134.2 106.0 143.8 (Percentage or Index Numbers) January 1976 January 1977 Money and Quasi Money as % of GEP 24.0 26.4 27.9 27.1 26.2 27.9 Wholesale Prioe Index (1961/62 = 100) 131.6 188.4 207.1 254.2 313.0 302.8 290.0 320.5 Annual peroentage changes ins Wholesale Prioe Index 7.7 4.0 9.9 22.7 23.1 10.5 Bank Credit to Public Sector 12.9 21.3 19.6 12.6 10.4 5.7 4.7 Bank Credit to Private Sector 12.8 13.6 18.0 18.5 21.5 22.5 24.6 A/ The per capita GNP estimate is at market prices, calculated by the conversion technique used in the World Atlas. All other conversions to dollars in this table are at the average exchange rate prevailing during the period covered. Q/ Quick Estimates. S/ Computed from trend line of GNP at factor cost series, inoluding one obeervatLon before first year and one observation after last year of listed period. dj Transfers between Center and States have been netted out. / All loans and advances to third parties have been netted out. t/ Net bank credit to Government Sector. / Bank Credit to Commercial Sector. E00RCIIC DEVELOPMENT DATA ANNEX I Page 4 of 4 BALANCE OF PAYMEITS i.7flL!4 .!X14L1 .i17lL2 1976/77 EEHCKAUDISZ WORTS (AlE 197 5 BALLNGES OFPYYT ji s illion Ua IDn.49~76 Exports of Goods 3,239 4,174 4,555 5,400 Sugar 342 9 Imports of Goods -3,971 -5,794 -6,o85 -5,850 Jute Manufactures 31t7 8 Trade Balance - 732 -1,62o -1,530 -450 Tes, 249 6 NYS (net) i/ n.a. n.n. n.-. R.&. Cotton Textiles -5l 415 10 Iron Ore 206 5 Resource Gap n.a. n.a. n.,. n.a. Engineering Goods 391 10 Others 2.071 52 Interest Payments (net) i 235 - 260 - 250 - 280 Total 5,989 100 Other Factor Payments (not) - n.a. n.e. n.a. n.S. Net Transfers 1/ n.a. n.e. n.I. n.e. Balanoe on Current Acoounts n.a. n.n. n.a. n.a. EmURL DE8T. mARCH 51. 1976 Official Aid US Billion Disbursements 1,249 1,766 2,326 2,050 Repayable in foreign currency 12.3 Amortisation - 459 - 519 - 516 - 560 Repayable throuh export of goode 0.7 Transactions with I1I 75 515 205 - 365 Total Outstanding and Disbursed 13.0 All Other Items 205 80 559 1,l00V DEBT SERVICE RATrIO FOR 1976/77 15.5 percent t Increase in Reserves (-) -105 38 - 794 -1495 Gross Reserves (end year) 1,416 1,378 2,172 3,667 IR/IDA LGDIE, December 31, 1976 (USS min.) Net Reserves (end year) 1,541 783 1,532 3,202 IBRD IDA Fuel and Related Materials Outstanding and Disbursed 452.7 3208.4 Imports 720 1,451 1,417 1,625 Undiebureed 510.3 1140.5 of which. Petroleum 719 1,451 1,417 1,625 Outstanding including _,ports 20 26 41 n. IL. Undiabureed 963.0 4348.9 Erporte 20 c6 41 n.a. of .hioh, Petroleum 16 17 22 n.a. RATE OF EXCHANGE / Prior to mid-Deosmber 1971 US$1.00 = Rs 7.5 After end June 1972 s Floating Rate Rs 1.00 = US50.133333 Spot Rate March 31, 1976 Mid-December 1971 to I US$1.00 = Rs 7.27927 approx. US$1.00 * Re. 8.80475 end June 1972 Rs 1.00 = UStO.157376 approx. Rs 1.00 = US$ 0.113575 j/ Estimated. i/ Included with 'All other Items'. ,/ Aid and trade figures converted to US dollars using exchange rates as indicated in inside front cover of this report or notes to individual tables, 2/ Including garmente. / Amortization and interest payments (excluding IFM0 transaotions) as a peroentage of merchandise exports. ANNEX II Page 1 of 12 THE STATUS OF BANK GROUP OPERATIONS IN INDIA A. STATEMENT OF BANK LOANS AND IDA CREDITS (As of May 31, 1977) Loan or US$ Millio-1/ Credit No. Year Borrower Purpose (Net of Cancellation) BANK IDA Undisbursed 39 Loans/ 1,089.2 43 Credits fully disbursed 2,344.8 614-IN 1969 India Tarai Seeds 13.0 - 3.7 203-IN 1970 India Punjab Agricultural Credit - 27.5 3.6 226-IN 1971 India Andhra Pradesh Agricultural Cr. - 24.4 0.6 250-IN 1971 India Tamil Nadu Agricultural Credit - 35.0 3.8 264-IN 1971 India Cochin II Fertilizer - 20.0 0.8 267-IN 1971 India Wheat Storage - 5.0 3.7 278-IN 1972 India Mysore Agricultural Credit - 40.0 1.2 294-IN 1972 India Bihar Agricultural Markets - 14.0 11.1 312-IN 1972 India Population - 21.2 8.7 342-IN 1972 India Education - 12.0 11.1 356-IN 1972 India IDBI - 25.0 12.4 377-IN 1973 India Power Transmission III - 85.0 27.6 378-IN 1973 India Mysore Agricultural Markets - 8.0 7.2 902-IN 1973 ICICI Industry DFC X 70.0 - 9.2 390-IN 1973 India Bombay Water Supply - 55.0 37.8 392-IN 1973 India Uttar Pradesh Agricultural Credit - 38.0 7.4 403-IN 1973 India Telecommunications V - 80.0 15.6 427-IN 1973 India Calcutta Urban Development - 35.0 15.1 440-IN 1973 India Bihar Agricultural Credit - 32.0 17.6 456-IN 1974 India HP Apple Processing & Marketing - 13.0 10.7 481-IN 1974 India Trombay IV - 50.0 18.3 lOll-IN 1974 India Chambal (Rajasthan) CAD 52.0 - 40.3 482-IN 1974 India Karnataka Dairy - 30.0 29.6 502-IN 1974 India Rajasthan Canal CAD - 83.0 56.6 520-IN 1974 India Sindri Fertilizer - 91.0 30.2 521-IN 1974 India Rajasthan Dairy - 27.7 27.4 522-IN 1974 India Madhya Pradesh Dairy - 16.4 15.8 526-IN 1975 India Drought Prone Areas - 35.0 28.8 1079-IN 1975 India IFFCO Fertilizer 109.0 - 88.1 1097-IN 1975 India Industry DFC XI 100.0 - 57.3 532-IN 1975 India Godavari Barrage Irrigation - 45.0 32.4 540-IN 1975 India ARC Credit - 75.0 32.1 541-IN 1975 India West Bengal Agrc. Dev. - 34.0 31.0 562-IN 1975 India Chambal (Madhya Pradesh) CAD - 24.0 21.1 572-IN 1975 India Rural Electrification - 57.0 54.6 582-IN 1975 India Railways XIII - 110.0 46.0 585-IN 1975 India Uttar Pradesh Water Supply - 40.0 39.5 598-IN 1975 India Fertilizer Industry - 105.0 97.5 604-IN 1975 India Power Transmission IV - 150.0 150.0 609-IN 1975 India Madhya Pradesh Forestry T.A. - 4.0 4.0 610-IN 1976 India Integrated Cotton Development - 18.0 18.0 616-IN 1976 India Industrial Imports XI - 200.0 7.0 1251-IN(TW) 1976 India Andhra Pradesh Irrigation 145.0 - 145.0 1260-IN 1976 India IDBI II 40.0 - 40.0 1273-IN 1976 India National Seed 25.0 - 25.0 1313-IN 1976 India Telecommunications VI 80.0 - 60.2 1335-IN 1976 India Bombay Urban Transport 25.0 - 25.0 680-IN 1977 India Kerala Agric. Dev. 30.0 30.0* 682-IN 1977 India Orissa Agric. Dev. 20.0 20.0* 685-IN 1977 India Singrauli Thermal 150.0 150.0* 687-IN 1977 India Madras Urban Dev. 24.0 24.0* 695-IN 1977 India Gujarat Fisheries 4.0 4-0* 1394-IN(TW) 1977 India Gujarat Fisheries 14.0 14,Q* Total 1,762.2 4,338.0 of which has been repaid 789.2 27.0 Total now outstanding 973.0 4,311.0 Amount Sold 114.6 of which has been repaid 111.5 Total now held by Bank and IDA 973.0 4,311.0 Total undisbursed 493.8 937.8 1,431.6 1/ Prior to exchange adjustments. * Not yet effective. ANNEX II Page 2 of 12 B. STATEMENT OF IFC INVESTMENTS (As of May 31, 1977) Fiscal Amount (US$ million) Year Company Loan Equity Total 1959 Republic Forge Company Ltd. 1.5 - 1.5 1959 Kirloskar Oil Engines Ltd. 0.9 - 0.9 1960 Assam Sillimanite Ltd. 1.4 - 1.4 1961 K.S.B. Pumps Ltd. 0.2 - 0.2 1963-66 Precision Bearings India Ltd. 0.7 0.3 1.0 1964 Fort Gloster Industries Ltd. 0.8 0.4 1.2 1964-75 Mahindra Ugine Steel Co. Ltd. 11.8 1.0 12.8 1964 Lakshmi Machine Works Ltd. 1.0 0.3 1.3 1967 Jayshree Chemicals Ltd. 1.0 0.1 1.1 1967 Indian Explosives Ltd. 8.6 2.9 11.5 1969-70 Zuari Agro-Chemicals Ltd. 15.1 3.8 18.9 1976 Escorts Limited 6.6 - 6.6 TOTAL 49.6 8.8 58.4 Less: Sold 6.0 1.6 7.6 Repaid 13.0 - 13.0 Cancelled 6.2 0.7 6.9 Now Held 24.4 6.5 30.9 Undisbursed 5.6 - 5.6 ANNEX II Page 3 of 12 C. PROJECTS IN EXECUTION -/ Generally, the implementation of projects has been proceeding reasonably well. Details on the execution of individual projects are below. The level of disbursements was US$551 million in FY76 or 62% of Bank Group commitments to India in that year. The undisbursed pipeline of US$1,524 million as of March 31, 1977, corresponds roughly to com- mitments over the preceding two-year period and reflects the leadtime which would be expected given the mix of fast and slow-disbursing projects in the India program. Ln. No. 902 Tenth Industrial Credit and Investment Corporation of India Project; US$70.0 million loan of June 8, 1973; Effective Date: August 16. 1973; Closing Date: December 31, 1978 Ln. No. 1097 Eleventh Industrial Credit and Investment Corporation of India ProJect; US$100 million loan of April 2, 1975; Effective Date: July 1, 1975; Closing Date: December 31, 1980 These loans have supported industrialization in India through a well-established development finance company. Loan 902-IN is fully committed and commitments are progressing satisfactorily for Loan 1097-IN. Disburse- ments under Loan 902-IN are ahead of schedule. Ln. No. 614 Tarai Seeds Project; US$13.0 million loan of June 18, 1969; Effective Date: September 12, 1969; Closing Date: Dec- ember 31, 1977 This loan to the Tarai Development Corporation is to assist in the production, processing and marketing of certified seeds of high yielding varieties. The corporation is working effectively and has developed an ex- cellent reputation for quality seed. Expansion of three processing plants is well under way. Delivery of some equipment in damaged condition, and retendering, because of poor response for some others, has delayed delivery schedules necessitating an extension of the Closing Date by one year to December 31, 1977. 1/ These notes are designed to inform the Executive Directors regarding the progress of projects in execution, and in particular to report any problems which are being encountered, and the action being taken to remedy them. They should be read in this sense and with the under- standing that they do not purport to present a balanced evaluation of strengths and weaknesses in project execution. ANNEX II Page 4 of 12 Cr. No. 203 Punjab Agricultural Credit Project; US$27.5 million credit of June 24, 1970; Effective Date: September 4. 1970; Closing Date: June 30, 1977 Cr. No. 226 Andhra Pradesh Agricultural Credit Project; US$24.4 million credit of January 8, 1971; Effective Date: May 10, 1971; Closing Date: June 30, 1977 Cr. No. 249 Haryana Agricultural Credit Project; US$25.0 million credit of June 11, 1971; Effective Date: November 2, 1971; Closing Date: June 30. 1977 Cr. No. 250 Tamil Nadu Agricultural Credit Project; US$35.0 million credit of June 11. 1971; Effective Date: November 2, 1971; Closing Date: June 30. 1977 Cr. No. 278 Mysore Agricultural Credit Project; US$40.0 million credit of January 7, 1972; Effective Date: September 25, 1972; Closing Date: June 30, 1977 Cr. No. 391 Madhya Pradesh Agricultural Credit Project; US$33.0 million credit of June 8. 1973; Effective Date: October 10, 1973; Closing Date: December 31, 1977 Cr. No. 392 Uttar Pradesh Agricultural Credit Project; US$38.0 million credit of June 8. 1973; Effective Date: October 31, 1973; Closing Date: December 31, 1977 Cr. No. 440 Bihar Agricultural Credit Project; US$32.0 million credit of November 29, 1973; Effective Date: March 29, 1974; Closing Date: June 30, 1977 Cr. No. 540 Agricultural Refinance and Development Corporation (ARDC) Project; US$75.0 million credit of April 28, 1975; Effective Date: August 5, 1975; Closing Date: Dec- ember 31, 1977 Apart from the Punjab project, which consists of mechanization equipment only, all the above agricultural credit projects are similar in structure, being designed to provide long- and medium-term credit to farm- ers through credit institutions for such on-farm investments as tractors, minor irrigation and land-leveling. Disbursement of the minor irrigation components are on schedule. Tractor procurement was delayed following changes in both the supply and demand situations after the projects were originally appraised, which prompted GOI to request that indigenous as well as imported models should be eligible for IDA financing under these credits. The Executive Directors approved this request in December 1973 and those credits which have tractor components have been amended accordingly. Tractor procurement is proceeding satisfactorily. Credit 540 is a continuation ANNEX II Page 5 of 12 nationwide of the previous program of agricultural credit projects, which were confined to individual states. ARDC will continue to act as the financial intermediary for refinancing agricultural credit. Cr. No. 267 Wheat Storage Project: US$5.0 million credit of August 23. 1971: Effective Date: November 14, 1972; Closing Date: September 30, 1978 The Food Corporation of India is making satisfactory progress in the execution of this project. Piling and foundation work is nearly com- pleted. Silo construction has begun and staff training is in progress. Cr. No. 456 Himachal Pradesh Apple Processing and Marketing Project; US$13 million credit of January 22, 1974; Effective Date: September 26, 1974; Closing Date: December 31, 1978 This project was designed to promote the development of apple processing and marketing in Himachal Pradesh, and comprises grading and packing centers, cold storages, a juice processing plant, road improvements and cableways. The project encountered initial delays due to managerial and technical problems, however, remedial measures have been taken to over- come these difficulties. A recent review mission found a satisfactory improvement in the prospects for successful project implementation. Cr. No. 403 Telecommunications V Project; US$80.0 million credit of June 25, 1973; Effective Date: July 30, 1973; Closing Date: December 31, 1977 Material supply problems which delayed the start of this project have been resolved and physical achievements were at record levels during fiscal year 1976. However, to cover the delivery and installation of im- ported transmission and switching equipment, the closing date was extended by one year to December 31, 1977. Cr. No. 377 Power Transmission III Project; US$85.0 million credit of May 9.. 1973; Effective Date: October 10. 1973; Closing Date: September 30. 1977 Cr. No. 604 Power Transmission IV Project; US$150.0 million credit of January 22, 1976; Effective Date: October 22. 1976; Closing Date: June 30, 1981 For Power Transmission III all equipment has been ordered; there will be a substantial cost overrun due to international price increases, part of which is being met from Power Transmission IV. For Power Transmission IV, bids for most of the equipment have been invited. ANNEX II Page 6 of 12 Cr. No. 264 Cochin II Fertilizer Prolect; US$20 million credit of July 30, 1971; Effective Date: December 2, 1971; Closing Date: June 30. 1977 Cr. No. 481 Trombay IV Fertilizer Expansion Project; US$50.0 million credit of June 19, 1974; Effective Date: August 21, 1974; Closing Date: December 31, 1977 Cr. No. 520 Sindri Fertilizer Project; US$91 million credit of December 18, 1974; Effective Date: February 27, 1975; Closing Date: September 30, 1978 Ln. No. 1079 IFFCO Fertilizer Project; US$109 million loan of January 24, 1975; Effective Date: April 28, 1975; Closing Date: March 31. 1979 Cr. No. 598 Fertilizer Industry Project; US$105.0 million credit of December 31. 1975; Effective Date: March 1. 1976; Closing Date: June 30, 1980 The Cochin Fertilizer Project is being commisssioned, about 31 months behind the appraisal estimate. Progress on the Trombay IV project has been good although project completion may be delayed by about four months because of longer than expected delivery times for critical equipment. Under the Sindri project plant construction and erection is proceeding generally according to schedule except for a one-month delay due to anticipated delays in receipt of some materials. Commencement of commercial production is ex- pected by March 1978. The anticipated cost to complete the project is pre- sently running within budget. The IFFCO project was delayed by about a year as a result of a change in feedstock from fuel oil to naphtha and delays in completion of engineering contracts. The project is now progressing satis- factorily based on naphtha as feedstock. Site work has begun, process- and time-critical equipment is being ordered, and engineering work is well under way. Credit 598-IN is designed to increase the utilization of existing fertilizer production capacity. The project has encountered delays in sub- project preparation and investment approvals by the Government. Further, some of the sub-projects identified earlier may not materialize because of reconsideration by the Central and State governments. The Central Govern- ment has submitted a list of sub-projects to replace the ones that are likely to be dropped. Because of the above, the project is likely to be delayed by 6-12 months. Cr. No. 294 Bihar Agricultural Markets Prolect; US$14.0 million credit of March 29, 1972; Effective Date: July 31, 1972; Closing Date: December 31. 1978 ANNEX II Page 7 of 12 Cr. No. 378 Karnataka Wholesale Agricultural Markets Project; US$8.0 mil- lion credit of May 9, 1973; Effective Date: September 7, 1973; Closing Date: December 31, 1979 These projects were designed to help with establishment of whole- sale markets in a number of towns in Bihar and Karnataka. Progress under the Bihar project has generally been satisfactory. Markets construction in Bihar was delayed due to legal challenges arising out of the state's acqui- sition of land for market sites; however, these difficulties have been satis- factorily resolved. Construction of markets is well advanced and a number have opened for business. Progress under the Karnataka project is much less satisfactory, however, largely due to deficiencies in market planning, design and construction. These problems and remedial actions have been brought to the attention of the State and Central Government. The project is being mon- itored closely to try and bring about the necessary improvements in implemen- tation. Cr. No. 312 Population Prolect; US$21.2 million credit of June 14, 1972; Effective Date: May 9, 1973; Closing Date: June 30, 1978 This credit is designed to finance an experimental and research oriented population project in Karnataka and Uttar Pradesh. The project's infrastructure, which would provide the optimum facilities (buildings, equip- ment, staff and transport) according to GOI standards in selected districts in each state, is almost complete. The two Population Centers, which will design and monitor research aimed at improving the family planning program, are now functioning. Cr. No. 342 Agricultural Universities Project; US$12.0 million credit of November 10, 1972; Effective Date: June 8, 1973; Closing Date: December 31, 1979 The project involves the development of the agricultural uni- versities in Assam and Bihar. Initial lag in implementation on account of late appointments of project staff has been overcome. Campus plans have been approved, and construction has started in Assam and is scheduled to start in Bihar by mid 1977. Disbursement which has been slow because of initial delays should accelerate now that construction and equipment procurement are under way. Cr. No. 356 Industrial Development Bank of India Project; US$25.0 million credit of February 9, 1973; Effective Date: June 22, 1973; Closing Date: June 30, 1977 Loan No. 1260 Second Industrial Development Bank of India Project; US$40.0 million loan of June 10, 1976; Effective Date: August 10. 1976; Closing Date: June 30, 1981 The first IDBI Project (Cr. 356) had a slow start mainly due to institutional problems in the participating State Financial Corporations. ANNEX II Page 8 of 12 However, the credit is now fully committed. In order to continue Bank Group's involvement in assisting small and medium scale industries, the second operation (Ln. 1260) was approved on June 10, 1976, and more than 10% of the loan amount had been authorized by mid-May 1977. Cr. No. 390 Bombay Water Supplv and Sewerage Project; US$55.0 million credit of January 22, 1974; Effective Date: March 13. 1974; Closing Date: December 31, 1978 A substantial cost overrun on the project from US$158 million equivalent to about US$375 million equivalent has been caused by inflation and price increases resulting from delays in appointment of engineering con- sultants and redesign of certain project components. The project has been redefined and rephased to fit the financing available from the Credit, local loans and bonds, and internal cash generation of the project entity. The revised cost estimates for the implementation period 1975/76 to 1979/80 amount to US$266 million equivalent excluding interest during construction. All major contracts for civil works, equipment and materials have been awarded. This is expected to considerably speed up disbursements which has been slow. Financial performance of the project entity during 1975/76 was satisfactory, and major rate increases from April 1, 1976 should ensure continuing financial viability of the project entity. Cr. No. 616 Eleventh Industrial Imports Project; US$200.0 million credit of February 24, 1976; Effective Date: April 1, 1976; Closing Date: June 30, 1977 This credit was signed on February 24, 1976, and became effective on April 1, 1976. Cr. No. 427 Calcutta Urban Development Project; US$35.0 million credit of September 12, 1973; Effective Date: January 10, 1974; Closing Date: December 31, 1978 Following considerable increases in project costs, GOI and IDA finalized a project redefinition in April 1976, to accommodate the project to funding available. It is now expected to be substantially completed by March 1979. Agreements have been reached on consultants services and technical assistance, as provided for under the project. Cr. No. 482 Karnataka Dairy Development Project; US$30 million credit of June 19, 1974; Effective Date: December 23, 1974; Closing Date: September 30, 1982 Cr. No. 521 Rajasthan Dairy Development Project;; US$27.7 million credit of December 18, 1974; Effective Date: August 8, 1975; Closing Date: December 31, 1982 ANNEX II Page 9 of 12 Cr. No. 522 Madhya Pradesh Dairy Development Project; US$16.4 million credit of December 18, 1974; Effective Date: July 23. 1975; Closing Date: June 30, 1982 These three credits totalling US$74.1 million support dairy devel- opment projects organized along the lines of the successful AMUL dairy coop- erative scheme in Gujarat State. The Karnataka Project which got off to a slow start has begun to show Improvement under new management appointed recently. Farmer response has been good and about 250 dairy cooperatives with small farmer participation are functioning effectively. Two Dairy Unions have been established. Close supervision is being maintained. In Madhya Pradesh good progress has been made. About 110 new dairy cooperatives societies have been established. Detailed design studies for plant construc- tion are complete. Technical services investments are being made. Contracts have been placed for livestock imports. The Rajasthan project is also doing well. Four milk unions have been formed and excellent progress has been made in organizing the servicing of nearly 350 dairy cooperatives at the village level. Plant-designs are ready, and procurement is to start soon. KDDC decision to procure plant equipment jointly with RDDC and MPDDC on the same tender should lead to a recovery of considerable time lost earlier. Cr. No. 532 Godavari Barrage Project; US$45 million credit of March 7, 1975; Effective Date: June 9, 1975; Closing Date: June 30, 1980 Both the civil works and equipment tenders have been awarded after international competitive bidding. Work is in progress. Ln. No. 1011 Chambal (Rajasthan) Command Area Development Project; US$52 million loan of June 19, 1974; Effective Date: December 12, 1974; Closing Date: June 30. 1981 Cr. No. 502 Ralasthan Canal Command Area Development Project; US$83 mil- lion credit of July 31, 1974; Effective Date: December 30, 1974; Closing Date: June 30, 1981 Cr. No. 562 Chambal (Madhya Pradesh) Command Area Development Project; US$24 million credit of June 20, 1975; Effective Date: September 18, 1975; Closing Date: December 31. 1979 Ln. No. 1251 Andhra Pradesh Irrigation and Command Area Development (TW) Composite Project; US$145.0 million loan (Third Window) of June 10, 1976: Effective Date: September 7,1976; Closing Date: December 31, 1982 These projects, based on existing large irrigation systems, are designed to improve the efficiency of water utilization and, where possible, to use water savings for bringing additional areas under irrigation. Canal lining and other irrigation infrastructures, drainage, and land shaping are ANNEX II Page 10 of 12 prominent components of these projects. In addition, provisions have been made to increase agricultural production and marketing by reforming and upgrading agricultural extension services and by providing processing and storage facilities and village access roads. Progress of these projects is generally satisfactory and particularly successful vith respect to agricultural extension. Cr. No. 541 West Bengal Agricultural Development Pro1ect: US$34 million credit of April 28. 1975; Effective Date: August 28. 1975; Closing Date: March 31. 1980 The project became effective on July 31, 1975. Successful reor- ganization of agricultural extension services has been a major achievement, but preparations for lending operations have been slow mainly due to poor coordination of project agencies. IDA and the government of West Bengal have agreed on measures to improve coordination and on a timetable covering a range of project activities. Progress with preliminaries for procurement of equipment, markets construction and riverlift completions are satis- factory. Cr. No. 526 Drought Prone Areas Project; US$35.0 million credit of January 24. 1975; Effective Date: June 9. 1975; Closing Date: June 30. 1980 Overall progress is satisfactory. Expenditure to date is less than expected -- about 22Z of project cost estimates -- but is reasonable because inflation has been much less than expected. The most successful component of this multi-componented project is dairying, which has a sig- nificant impact on rural incomes. Other components are, in general, meeting appraisal targets in terms of physical achievements, although with some time lag. There are, however, several technical problems which need to be overcome. DPAP is largely innovative program and the emergence of such problems was expected. The identification of these problems represents a major first step to their resolution and subsequently to establishing pro- grams which can be replicated throughout India's 72 drought prone districts. Cr. No. 572 Rural Electrification Project; US$57.0 million credit of July 23, 1975; Effective Date: October 23. 1975: Closing Date: December 31. 1979 Eleven states have now fulfilled the conditions of eligibility for on-lending under this project [compared with six at the time of appraisal] The project got off to a slow start, due principally to the need to adapt specifications and tender documents to international competitive bidding procedures, but these problems have been overcome. As of September 1976, orders had been placed for 60 approved rural electrification schemes, and tenders had been invited or were in the course of preparation for others. ANNEX II Page 11 of 12 Cr. No. 582 Railways XIII Project: US$110.0 million credit of August 26, 1975; Effective Date: October 10, 1975: Closing Date: September 30, 1977 The project is intended to cover most of the foreign exchange requirements of Indian Railway's (IR) investment program from April 1, 1975, through March 31, 1977. Since the approval of the project, increased pro- duction in steel products in India and further developments in IR's indigen- ization program have resulted in a less than anticipated foreign exchange requirement. It is expected, therefore, that of a total Credit of US$110 million, some US$30-40 million may be undisbursed at the end of the current project period. During the year 1975/76, IR carried 223 million tons of freight traffic, 6% more than forecasted. The project is being implemented satisfactorily. Cr. No. 585 Uttar Pradesh Water Supply and Sewerage Project; US$40.0 million credit of September 25, 1975; Effective Date: February 6. 1976: Closing Date: June 30, 1980 The project had a slow start due to delays in preparation of techni- cal reports for regional and local water authorities. The technical reports for about a third of the project have now been finalized and construction works started in October 1976, about one year behind schedule. All consul- tants for engineering, organization, management and accounting services for the Jal Nigam (Water Supply Development Corporation) and the Jal Sansthans (water authorities) have been engaged. Significant institutional develop- ment can be expected only after the consultants submit their final recommenda- tions. The project is expected to be completed by March 1980, approximately 9 months behind schedule. Cr. No. 609 Madhya Pradesh Forestry Technical Assistance Project; US$4.0 million credit of February 26. 1976; Effective Date: May 26, 1976; Closing Date: December 31, 1981 This project will identify a sound resource base for pulp and paper manufacture and related industries, develop suitable logging systems, and undertake a feasibility study to determine optimal use of the existing wood resources in the Bastar District of southern Madhya Pradesh. It also includes a study of ways to integrate the area's tribal population with future develop- ment. After initial delays due to difficulties in employing key personnel, project implementation is now satisfactory. For the feasibility study, proj- ect authorities have prepared a short list of three foreign consulting firms, who are now being asked to prepare detailed proposals. On the basis of these proposals, the final selection will be made shortly. Cr. No. 610 Integrated Cotton Development Project; US$18.0 million credit of February 26. 1976; Effective Date: November 30, 1976: Closing Date: December 31. 1981 ANNEX II Page 12 of 12 Ln. No. 1273 National Seed Project; US$25.0 million loan of June 10. 1976; Effective Date: October 8, 1976; Closing Date: June 30, 1981 Good progress has been made since negotiations. The National Seeds Corporation (NSC) has withdrawn from seeds production as planned, hav- ing handed over to State Seeds Corporation (SSC). Detailed production pro- grams, by variety and responsible institution, have been prepared for breeder, foundation and certified generations. GOI and State Governments have made equity contributions to SSC thus ensuring financing of major project activity. Orders will shortly be placed for processing machinery to provide bridging capacity pending the construction of new processing plants. Tender documents for the first purchases of farm machinery have been finalized. Ln. No. 1313 Sixth Telecommunications Project; US$80.0 million loan of July 22, 1976; Effective Date: September 14, 1976: Closing Date: March 31. 1980 Disbursements have commenced and the project is progressing satis- factorily. Ln. No. 1335 Bombay Urban Transport Project; US$25.0 million loan of December 20, 1976; Effective Date: March 10, 1977; Closing Date: June 30, 1980 Procurement work is well in hand. Contracts for 275 single and 175 double deck bus chassis have been awarded and bidding for corresponding bus bodies is in progress. Civil works for bus facilities have been partly commissioned and bidding for 18 of 31 traffic engineering schemes is in progress. Preparations for technical assistance envisaged under the project are under way. Cr. No. 680 Kerala Agricultural Development Project; US$30 million credit of April 1. 1977; Effective Date: July 1, 1977 (expected) Closing Date: March 31, 1985 Cr. No. 682 Orissa Agricultural Development Project; US$20 million credit of April 1, 1977; Effective Date: July 1. 1977 (expected); Closing Date: December 31, 1983 Ln. No. 1394 Gujarat Fisheries Project; US$14 million loan and US$4 (TW) and million credit of April 22, 1977; Effective Date: Cr. No. 695 July 22, 1977 (expected); Closing Date: June 30, 1983 Cr. No. 687 Madras Urban Development Project; US$24.0 million credit of April 1, 1977; Effective Date: June 30, 1977 (expected) Closing Date: September 30, 1981 Cr. No. 685 Singrauli Thermal Power ProJect; US$150.0 million credit of April 1. 1977; Effective Date: June 30, 1977 (expected); Closing Date: December 31. 1983 ANNEX III Page I INDIA - BOMBAY HIGH OFFSHORE DEVELOPMENT PROJECT SUPPLEMENTARY PROJECT DATA SHEET Section I Timetable of Key Events (a) Time taken by the country to prepare the project Project has been under preparation since oil was discovered at Bombay High in 1974. (b) The agency which has prepared the prolect ONGC/Ministry of Petroleum (c) Date of first presentation to Bank and date of first mission to consider the project June 1976/July 1976 (d) Date of departure of appraisal mission January 7, 1977 (e) Date of completion of negotiations June 2, 1977 (f) Planned date of effectiveness September 30, 1977 Section II Special Bank Implementation Actions None Section III Special Conditions (a) GOI to cover all of ONGC's financing requirements (para 38). (b) ONGC to acquire all necessary land and rights of way (para 41). ANNEX III Page 2 (c) ONGC to establish a satisfactory management information system (para 42). (d) ONGC to submit annually updated development plan of Bombay High and North Bassein fields (para 42). (e) ONGC to prepare and furnish each year to the GOI an eco- nomic and financial evaluation of the project and of any subsequent major development, which will indicate the price level required for ONGC to earn a DCF return of at least 15%. GOI to review, on the basis of this report, the price of oil and gas produced by ONGC with a view to determine the price levels needed to enable -ONGC, under conditions of efficient operation, to meet its operating expenses and earn a return on its invested capital sufficient to cover its debt service require- ments, maintain adequate working capital and finance a substantial portion of its proposed capital expansion (para 47). 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