Page  1
CONFORMED COPY
LOAN NUMBER 4577 IN
Project Agreement
(Gujarat State Highway Project)
between
INTERNATIONAL BANK FOR RECONSTRUCTION
AND DEVELOPMENT
and
STATE OF GUJARAT
Dated October 18, 2000
LOAN NUMBER 4577 IN
PROJECT AGREEMENT
AGREEMENT, dated October 18, 2000, between the INTERNATIONAL BANK 
FOR RECONSTRUCTION AND DEVELOPMENT (the Bank) and the STATE OF GUJARAT, 
acting by its Governor (Gujarat).
WHEREAS by the Loan Agreement of even date herewith between India 
(the Borrower) and the Bank, the Bank has agreed to make available to the 
Borrower an amount equal to three hundred eighty-one million dollars 
($381,000,000), on the terms and conditions set forth in the Loan 
Agreement, but only on condition that Gujarat agree to undertake such 
obligations toward the Bank as are set forth in this Agreement; and
WHEREAS Gujarat, in consideration of the Bank’s entering into the 
Loan Agreement with the Borrower, has agreed to undertake the obligations 
set forth in this Agreement;
NOW THEREFORE the parties hereto hereby agree as follows:
ARTICLE I
Definitions
Page  2
Section 1.01. Unless the context otherwise requires, the several 
terms defined in the Loan Agreement, the Preamble to this Agreement and 
the General Conditions (as so defined) have the respective meanings 
therein set forth.
ARTICLE II
Execution of the Project
Section 2.01. (a) Gujarat declares its commitment to the objectives 
of the Project as set forth in Schedule 2 to the Loan Agreement, and, to 
this end, shall carry out the Project, through R&BD, with due diligence 
and efficiency and in conformity with appropriate administrative, 
financial, engineering, transport and environmental practices, and shall 
provide, or cause to be provided, promptly as needed, the funds, 
facilities, services and other resources required for the Project.
(b)
Without limitation upon the provisions of paragraph (a) of 
this Section and except as the Bank and Gujarat shall otherwise agree, 
Gujarat shall carry out the Project in accordance with the Implementation 
Program set forth in Schedule 2 to this Agreement and the Project 
Implementation Plan.
Section 2.02.  Except as the Bank shall otherwise agree, 
procurement of the goods, works and consultants’ services required for 
the Project and to be financed out of the proceeds of the Loan shall be 
governed by the provisions of Schedule 1 to this Agreement.
Section 2.03. (a) Gujarat shall carry out the obligations set forth 
in Sections 9.04, 9.05, 9.06, 9.07, 9.08 and 9.09 of the General 
Conditions (relating to insurance, use of goods and services, plans and 
schedules, records and reports, maintenance and land acquisition, 
respectively) in respect of the Project Agreement.
(b)
For the purposes of Section 9.07 of the General Conditions 
and without limitation thereto, Gujarat shall:
(i)
prepare, on the basis of guidelines acceptable to the 
Bank, and furnish to the 
Bank not later than six (6) 
months after the Closing Date or such later date 
as may 
be agreed for this purpose between the Bank and Gujarat, a plan for the 
future operation of the Project; and
(ii)
afford the Bank a reasonable opportunity to exchange 
views with Gujarat on 
said plan.
Section 2.04. (a) Gujarat shall, at the request of the Bank, 
exchange views with the Bank with regard to progress of the Project, the 
performance of its obligations under this Agreement and other matters 
relating to the purposes of the Loan.
(b)
Gujarat shall promptly inform the Bank of any condition 
which interferes or threatens to interfere with the progress of the 
Project, the accomplishment of the purposes of the Loan, or the 
performance by Gujarat of its obligations under this Agreement.
ARTICLE III
Financial Covenants
Section 3.01. (a) Gujarat shall maintain or cause to be maintained 
records and accounts adequate to reflect in accordance with sound 
accounting practices its operations and financial condition and to 
register separately the operations, resources and expenditures related to 
the Project.
(b)
Gujarat shall:
Page  3
(i)
have the records and accounts referred to in 
paragraph (a) of this Section for 
each Fiscal Year 
audited, in accordance with appropriate auditing principles 
consistently applied, by independent auditors acceptable to 
the Bank;
(ii)
furnish to the Bank as soon as available, but in any 
case not later than six 
months after the end of each such 
Fiscal Year, the report of such audit by 
said 
auditors of such scope and in such detail as the Bank shall have 
reasonably requested; and
(iii)
furnish to the Bank such other information concerning 
said records and 
accounts as well as the audit 
thereof, as the Bank shall from time to time 
reasonably request.
Section 3.02. (a) Without limitation upon the provisions of Section 
3.01 of this Agreement, Gujarat shall carry out a time-bound action plan 
acceptable to the Bank for the strengthening of the financial management 
system referred to in paragraph (a) of said Section 3.01 in order to 
enable Gujarat, not later than December 31, 2001 or such later date as 
the Bank shall agree, to prepare quarterly Project Management Reports, 
acceptable to the Bank, each of which:
 (i) 
(A) 
sets forth actual sources and applications of 
funds for the Project, 
both cumulatively and for the 
period covered by said report, and projected 
sources 
and applications of funds for the Project for the six-month period 
following the period covered by said report; 
and (B) shows separately 
expenditures financed out 
of the proceeds of the Loan during the period 
covered 
by said report and expenditures proposed to be financed out of the 
proceeds of the Loan during the six-month 
period following the period covered 
by said report;
(ii)
(A) 
describes physical progress in Project 
implementation, both 
cumulatively and for the 
period covered by said report; and (B) explains 
variances between the actual and previously forecast implementation 
targets; and
(iii)  sets forth the status of procurement under the 
Project and expenditures under 
contracts financed out of 
the proceeds of the Loan, as at the end of the 
period covered by said report.
(b)
Upon the completion of the action plan referred to in 
paragraph (a) of this Section, the Borrower shall prepare, in accordance 
with guidelines acceptable to the Bank and furnish to the Bank not later 
than 45 days after the end of each calendar quarter a Project Management 
Report for such period.
ARTICLE IV
Effective Date; Termination;
Cancellation and Suspension
Section 4.01. This Agreement shall come into force and effect on 
the date upon which the Loan Agreement becomes effective.
Section 4.02. This Agreement and all obligations of the Bank and of 
Gujarat thereunder shall terminate on the date on which the Loan 
Agreement shall terminate in accordance with its terms, and the Bank 
shall promptly notify Gujarat thereof.
Page  4
Section 4.03. All the provisions of this Agreement shall continue 
in full force and effect notwithstanding any cancellation or suspension 
under the General Conditions.
ARTICLE V
Miscellaneous Provisions
Section 5.01. Any notice or request required or permitted to be 
given or made under this Agreement and any agreement between the parties 
contemplated by this Agreement shall be in writing.  Such notice or 
request shall be deemed to have been duly given or made when it shall be 
delivered by hand or by mail, telegram, cable, telex or facsimile to the 
party to which it is required or permitted to be given or made at such 
party’s address hereinafter specified or at such other address as such 
party shall have designated by notice to the party giving such notice or 
making such request. The addresses so specified are:
For the Bank:
International Bank for
  Reconstruction and Development
1818 H Street, N.W.
Washington, D.C. 20433
United States of America
Cable address:
Telex:
INTBAFRAD
248423 (MCI) or
Washington, D.C.
 64145 (MCI)
For Gujarat:
Chief Secretary
Government of Gujarat
Gandhinagar
Gujarat, India
Section 5.02. Any action required or permitted to be taken, and any 
document required or permitted to be executed, under this Agreement on 
behalf of Gujarat may be taken or executed by its Chief Secretary or such 
other person or persons as Gujarat shall designate in writing, and 
Gujarat shall furnish to the Bank sufficient evidence of the authority 
and the authenticated specimen signature of each such person.
Section 5.03. This Agreement may be executed in several 
counterparts, each of which shall be an original, and all collectively 
but one instrument.
IN WITNESS WHEREOF, the parties hereto, acting through their duly 
authorized representatives, have caused this Agreement to be signed in 
their respective names in the District of Columbia, United States of 
America, as of the day and year first above written.
INTERNATIONAL BANK FOR
  RECONSTRUCTION AND DEVELOPMENT
By /s/ Edwin R. Lim
Country Director, India
STATE OF GUJARAT
Page  5
By /s/  H. P. Jamdar
Authorized Representative
SCHEDULE 1
Procurement and Consultants’ Services
Section I.
Procurement of Goods and Works
Part A:
General
Goods and works shall be procured in accordance with the provisions 
of Section I of the “Guidelines for Procurement under IBRD Loans and IDA 
Credits” published by the Bank in January 1995 and revised in January and 
August 1996 and September 1997, and January 1999 (the Guidelines) and the 
following provisions of this Section.
Part B:
International Competitive Bidding
1.
Except as otherwise provided in Part C of this Section, goods and 
works shall be procured under contracts awarded in accordance with the 
provisions of Section II of the Guidelines and paragraph 5 of Appendix 1 
thereto.
2.
The following provisions shall apply to goods and works to be 
procured under contracts awarded in accordance with the provisions of 
paragraph 1 of this Part B.
(a)
Prequalification
Bidders for contracts for works under Part A.1 of the Project shall 
be prequalified in accordance with the provisions of paragraphs 2.9 and 
2.10 of the Guidelines.
(b)
Dispute Review Board
Each contract for works estimated to cost $10,000,000 equivalent or 
more shall include the provisions for a dispute review board set forth in 
the standard bidding documents for works referred to in paragraph 2.12 of 
the Guidelines.
(c)
Notification and Advertising
The invitation to prequalify or bid for each contract estimated to 
cost $10,000,000 equivalent or more shall be advertised in accordance 
with the procedures applicable to large contracts under paragraph 2.8 of 
the Guidelines.
Part C:
Other Procurement Procedures
1.
National Competitive Bidding
The following may be procured under contracts awarded in accordance 
with the provisions of paragraphs 3.3 and 3.4 of the Guidelines: (a) 
works under Part B of the Project estimated to cost less than $5,000,000 
equivalent per contract, up to an aggregate amount not to exceed 
$68,000,000 equivalent; and (b) goods estimated to cost less than 
$200,000 equivalent per contract, up to an aggregate amount not to exceed 
$500,000 equivalent.
2.
National Shopping
Goods estimated to cost less than $50,000 equivalent per contract, 
up to an aggregate amount not to exceed $500,000 equivalent, may be 
procured under contracts awarded on the basis of national shopping 
Page  6
procedures in accordance with the provisions of paragraphs 3.5 and 3.6 of 
the Guidelines.
3.
Force Account
Works related to (a) road overbridges, road underbridges and 
shifting of utilities under Part A.1 of the Project, (b) infrastructure 
facilities for carrying out resettlement and rehabilitation of project 
affected people under Part A.2 of the Project and (c) other minor items 
as agreed by Gujarat and the Bank, estimated to cost less than $1,000,000 
equivalent per contract, up to an aggregate amount not to exceed 
$6,000,000 equivalent, which meet the requirements of paragraph 3.8 of 
the Guidelines, may, with the Bank’s prior agreement, be carried out by 
force account in accordance with the provisions of said paragraph of the 
Guidelines.
Part D:
Review by the Bank of Procurement Decisions
1.
Procurement Planning
Prior to the issuance of any invitations to prequalify for bidding 
or to bid for contracts, the proposed procurement plan for the Project 
shall be furnished to the Bank for its review and approval, in accordance 
with the provisions of paragraph 1 of Appendix 1 to the Guidelines.  
Procurement of all goods and works shall be undertaken in accordance with 
such procurement plan as shall have been approved by the Bank, and with 
the provisions of said paragraph 1.
2.
Prior Review
The procedures set forth in paragraphs 2 and 3 of Appendix 1 to the 
Guidelines shall apply to: (a) each contract for works under Part A.1 of 
the Project estimated to cost the equivalent of $5,000,000 or more; (b) 
the first three contracts for works under Part B of the Project 
regardless of the amount; and (c) each contract for goods estimated to 
cost the equivalent of $50,000 or more.
3.
Post Review
With respect to each contract not governed by paragraph 2 of this 
Part, the procedure set forth in paragraph 4 of Appendix 1 to the 
Guidelines shall apply.
Section II.
Employment of Consultants
Part A:
General
Consultants’ services shall be procured in accordance with the 
provisions of the Introduction and Section IV of the “Guidelines: 
Selection and Employment of Consultants by World Bank Borrowers” 
published by the Bank in January 1997 and revised in September 1997 and 
January 1999 (the Consultant Guidelines) and the following provisions of 
Section II of this Schedule.
Part B:
Quality- and Cost-based Selection
Except as otherwise provided in Part C of this Section, 
consultants’ services shall be procured under contracts awarded in 
accordance with the provisions of Section II of the Consultant 
Guidelines, paragraph 3 of Appendix 1 thereto, Appendix 2 thereto, and 
the provisions of paragraphs 3.13 through 3.18 thereof applicable to 
quality- and cost-based selection of consultants.
Part C:
Other Procedures for the Selection of Consultants
1.
Selection Under a Fixed Budget or Single Source Selection
Page  7
The following services may be procured (a) under contracts awarded 
in accordance with the provisions of paragraphs 3.1 and 3.5 of the 
Consultant Guidelines or (b) with the Bank’s prior agreement, in 
accordance with the provisions of paragraphs 3.8 through 3.11 of the 
Consultant Guidelines: (i) design works and assistance with project 
coordination and development of strengthened project management 
procedures under Part A.1 of the Project; (ii) technical assistance for 
institutional capacity improvement under Part C of the Project; and (iii) 
pre-investment studies for preparation of potential future projects.
2.
Individual Consultants
Services for tasks that meet the requirements set forth in 
paragraph 5.1 of the Consultant Guidelines shall be procured under 
contracts awarded to individual consultants in accordance with the 
provisions of paragraphs 5.1 through 5.3 of the Consultant Guidelines.
Part D:
Review by the Bank of the Selection of Consultants
1.
Selection Planning
Prior to the issuance to consultants of any requests for proposals, 
the proposed plan for the selection of consultants under the Project 
shall be furnished to the Bank for its review and approval, in accordance 
with the provisions of paragraph 1 of Appendix 1 to the Consultant 
Guidelines.  Selection of all consultants’ services shall be undertaken 
in accordance with such selection plan as shall have been approved by the 
Bank, and with the provisions of said paragraph 1.
2.
Prior Review
(a)
With respect to each contract for the employment of 
consulting firms estimated to cost the equivalent of $100,000 or more, 
the procedures set forth in paragraphs 1, 2 (other than the third 
subparagraph of paragraph 2(a)) and 5 of Appendix 1 to the Consultant 
Guidelines shall apply.
(b)
With respect to each contract for the employment of 
individual consultants estimated to cost the equivalent of $50,000 or 
more, the qualifications, experience, terms of reference and terms of 
employment of the consultants shall be furnished to the Bank for its 
prior review and approval.  The contract shall be awarded only after the 
said approval shall have been given.
3.
Post Review
With respect to each contract not governed by paragraph 2 of this 
Part, the procedures set forth in paragraph 4 of Appendix 1 to the 
Consultant Guidelines shall apply.
SCHEDULE 2
Implementation Program
1.
Gujarat shall:
(a)
maintain the PIU with composition, powers, functions, 
capacity and resources satisfactory to the Bank;
(b)
produce quarterly reports, for review by the Bank, on: (i) 
the implementation progress of the Project, including the progress of the 
Environmental Management Action Plan contained in the ESR, additional 
environmental management action plans referred to in paragraph 2(d) of 
this Schedule, the RAP and updates to the RAP referred to in paragraph 
2(h) of this Schedule; and (ii) proposed action plans for the Project;
(c)
implement the action plans developed under the IDS and set 
Page  8
forth in the Project Implementation Plan in a manner and with a time 
schedule satisfactory to the Bank;
(d)
develop and install a computerized Project Financial 
Management System satisfactory to the Bank by December 31, 2000;
(e)
ensure that all contracts for civil works under Parts A and 
B of the Project will include environmental mitigation measures 
satisfactory to the Bank;
(f)
ensure that, during the period of Project implementation, 
the annual expenditure for the maintenance of state roads (comprising 
state highways, major district roads, other district roads and village 
roads) will be increased for each Fiscal Year, beginning with Fiscal Year 
2000-2001, by at least 10% in real terms, based on the Borrower’s 
Wholesale Price Index, from the immediately preceding Fiscal Year; and
(g)
submit to the Bank, in each year during the period of 
Project implementation, Gujarat’s approved annual capital and maintenance 
allocations for the road sector within thirty (30) days of its approval.
2.
Gujarat shall:
(a)
without limitation to Section 9.09 of the General 
Conditions, take such action as may be necessary to acquire land as and 
when needed for carrying out the Project;
(b)
comply with all the conditions imposed by the relevant 
governmental authorities under the environmental and forestry clearances 
issued by such authorities in connection with the Project;
(c)
implement the environmental mitigation, monitoring, 
institutional strengthening and other measures set out in the SEA and the 
ESR (including the Environmental Management Action Plan) in accordance 
with the objectives, policies, procedures, time schedule and other 
provisions set out therein and shall not take any action which would 
prevent or interfere with such implementation;
(d)
submit to the Bank environmental study reports, satisfactory 
to the Bank, including environmental management action plans for 
mitigating the adverse environmental impacts of road construction and 
improvement, for those sections of state highways covered by Part A.1 of 
the Project for which detailed environmental studies were not completed 
as of April 1998, before bids relating to works for such sections of 
state highways are invited;
(e)
obtain from the relevant governmental authorities all 
necessary environmental and forestry clearances for the sections of state 
highways referred to in subparagraph (d) of this paragraph and submit 
copies of such clearances to the Bank, before contracts for the works 
referred to in such subparagraph (d) are awarded;
(f)
implement each of the environmental management action plans 
referred to in subparagraph (d) of this paragraph in accordance with the 
objectives, policies, procedures, time schedule and other provisions set 
out therein and shall not take any action which would prevent or 
interfere with such implementation;
(g)
implement the RAP in accordance with the objectives, 
policies, procedures, time schedule and other provisions set out therein 
and shall not take any action which would prevent or interfere with such 
implementation;
(h)
submit to the Bank updates to the RAP, satisfactory to the 
Bank, based on detailed socio-economic surveys of project affected people 
and consistent with the principles set out in the RAP, for those sections 
of state highways covered by Part A.1 of the Project for which such 
Page  9
surveys were not completed as of April 1998, before bids relating to 
works for such sections of state highways are invited; and
(i)
implement the RAP with the updates referred to in 
subparagraph (h) of this paragraph in accordance with the objectives, 
policies, procedures, time schedule and other provisions set out therein 
and shall not take any action which would prevent or interfere with such 
implementation.
3.
Gujarat shall:
(a)
maintain policies and procedures adequate to enable it to 
monitor and evaluate on an ongoing basis, in accordance with indicators 
satisfactory to the Bank, the carrying out of the Project and the 
achievement of the objectives thereof;
(b)
prepare, under terms of reference satisfactory to the Bank, 
and furnish to the Bank, on or about May 31, 2002, a report integrating 
the results of the monitoring and evaluation activities performed 
pursuant to subparagraph (a) of this paragraph, on the progress achieved 
in the carrying out of the Project during the period preceding the date 
of said report and setting out the measures recommended to ensure the 
efficient carrying out of the Project and the achievement of the 
objectives thereof during the period following such date; and
(c)
review with the Bank, by June 30, 2002, or such later date 
as the Bank shall request, the report referred to in subparagraph (b) of 
this paragraph, and, thereafter, take all measures required to ensure the 
efficient completion of the Project and the achievement of the objectives 
thereof, based on the conclusions and recommendations of the said report 
and the Bank’s views on the matter.