SECOND AGREEMENT OF ECONOMIC COLLABORATION BETWEEN THE GOVERNMENT OF INDIA AND THE GOVERNMENT OF THE CZECHOSLOVAK SOCIALIST REPUBLIC
Prague, 11 May 1964
The Government of India and the Government of the Czechoslovak Socialist Republic,
BEING mutually desirous of achieving the closest possible collaboration in the economic and technical fields, and
HAVING in view the successful development of the economic relations between both the countries on the basis of equality and mutual
HAVE agreed as follows :
The Government of the Czechoslovak Socialist Republic will enable the Czechoslovak Foreign Trade Corporations to deliver under the
terms and conditions mentioned in this Agreement machinery, industrial equipment and other supplies for the construction of the Projects
and in connection with the production Programmes of various Projects as may be mutually agreed upon between the two Governments.
While the Czechoslovak Government shall permit manufacture of all items ordered, the Government of India will issue the requisite
The Government of the Czechoslovak Socialist Republic will make available to the Government of India a Credit upto Rs. 400 million
Indian rupees in words Four Hundred Millions (One Indian rupee contains 0.186621 grammes of fine gold) in payment of the FOB value
of the deliveries effected from Czechoslovakia to India in pursuance of the contracts for the deliveries of machinery, industrial
equipment and other supplies as envisaged in Article 1. The said contracts will be concluded before December 31, 1967 in Indian rupees
between the Czechoslovak Foreign Trade Corporations and the Indian organisations authorised by the Government of India in this behalf.
The aforementioned credit may be drawn upon from the date when the present Agreement comes into force upto the completion of deliveries
in accordance with the terms and conditions of the respective contract(s).
The date when the Statni Banka Ceskoslovenska honours the documents presented as per Article 6 by the Czechoslovak exporter(s), shall
be considered as the date on which the Credit has been drawn.
The Statni Banka Ceskoslovenska shall open on their books in the name of the Government of India (Ministry of Finance) a Credit Account
in Indian rupees for each Plant or Programme envisaged under Article 1. No charges will be levied for the maintenance of these accounts.
On presentation of the respective invoice and Bill of Lading or appropriate transport documents for consignments sent to India by
air, the Statni Banka Ceskoslovenska is authorised to make the payments mentioned in Article 4, to the Czechoslovak Foreign Trade
Corporations concerned, by raising corresponding debits in the above-mentioned Account(s).
As and when repayments are made in the Account established in accordance with Article 8, the Statni Banka Ceskoslovenska shall credit
the amounts so repaid to the relevant Credit Account(s).
The Credit shall bear an interest of 2 1/2% per annum, the amount of interest payable being calculated on the amount outstanding
to the debit of the Indian party in the Credit Accounts, as on June 30 and December 31st each year. The amount of interest so calculated
will be communicated to the Government of India (Ministry of Finance) to be paid within one month after receipt of intimation. The
last payment of interest shall be effected simultaneously with the last instalment of the respective Credit.
The amount of the credit drawn in accordance with Article 5 shall be repaid by the Government of India as follows :
The amount outstanding after the completion of delivery for the corresponding plant and supplies, in each respective Credit Account
mentioned in Article 5 shall be divided into twelve (12) equal yearly instalments. The first instalment for the repayment of this
Credit shall be paid upon the expiry of one year after the presentation of the final invoice and other documents, vide Article 5 to the Statni Banka Ceskoslovenska, in respect of the last delivery of the machinery and equipment for putting the Plant
in question into operation. The next instalment being due after the lapse of each successive year.
For supplies connected with the production Programmes mentioned in Article 1, the deliveries effected in each calendar year will constitute
a separate Programme and the amount outstanding as at the end of each calendar year will be divided into 8 (eight) equal yearly instalments
and the first instalment shall be paid on the second day of the second following calendar year; the subsequent instalments being
due on the second day of each successive year.
Repayment of the credit and payment of the interest accrued thereon shall be credited to a separate account styled as the Indo-Czechoslovak
Credit Repayment Account (II), to be opened by the Reserve Bank of India in the name of the Statni Banka Ceskoslovenska.
The amount tendered into the above account shall be utilised for purchasing Indian goods for export to Czechoslovakia. This will be
done in accordance with the Trade and Payments Agreement between the two countries as might be in force from time to time. In the
absence of such a Trade and Payments Agreement, the goods to be purchased from India for export to Czechoslovakia will be mutually
agreed upon between the two Governments.
In case of the change in the gold parity of Indian rupee mentioned in Article 3, the amount of unutilized credit made available thereunder,
the value of unfulfilled deliveries of the contracts concluded, balances in the respective Credit Accounts established under Article
5 as well as the balance in the Indo-Czech Credit Repayment Account (II) opened under Article 8 shall be adjusted as of the date
when the change takes place in proportion to the change in the gold parity.
The prices of goods to be purchased and sold under this Agreement would be based on world market prices and shall be agreed upon
between the parties concerned at the time of concluding specific contracts.
Payments relating to technical assistance, projects work and other services in connection with the setting up of the plants and the
supplies envisaged in Article 1, shall not be drawn upon the afore-mentioned Credit but shall be effected by the Indian partner in
accordance with the Trade and Payments Agreement in force at the time.
The Statni Banka Ceskoslovenska and the Government of India (Ministry of Finance) as also the Reserve Bank of India shall mutually
agree upon all the necessary financial and banking procedures for putting into effect the present Agreement.
Both the Governments undertake to do their best to enable the conclusion of the contracts as early as possible and for their proper
In order to facilitate a smooth implementation and full realisation of this Agreement both the Governments shall consult each other.
For such consultations, if necessary, a meeting of the representatives of both the Governments shall be convened at the request of
either Government at any time as soon as possible, alternatively in Praha and New Delhi.
Besides, in case of dispute between the Czechoslovak supplier and the Indian importer in respect of their contracts concluded the
representatives of both the Governments shall consult each other in order to bring about mutual agreement.
This Agreement shall come into force on the date of its signing and shall be valid until all obligations arising from the implementation
of this Agreement for both the Governments are fulfilled.
DONE in Praha on the eleventh day of May, 1964 in two originals in the English language, both texts being equally authentic.
On behalf of the
Government of India
Joint Secretary to the Government of India,
Leader, Indian Economic Delegation.
On behalf of the
Government of the Czechoslovak Socialist Republic
Vice Minister of the Czechoslovak Socialist Republic,
Leader, Czechoslovak Delegation.
Dated, 11 th May 1964
I have the honour to acknowledge receipt of your letter of to-days’ date which reads as follows :
“With reference to the Second Agreement on Economic Collaboration between our two countries signed to-day, it has been agreed between
us that the following Projects and Programmes will be financed under the Credit :
(a) Expansion of the High Pressure Boiler Plant at Tiruchirapalli;
(b) Expansion of the Heavy Power Equipment Plant at Ramchandrapuram;
(c) Two factories for the manufacture of machine tools;
(d) Additional foundry and forge facilities;
(e) 2 x 110 MW Thermal Power Plant with at least 30% Indian participation;
(f) Factory for the manufacture of tractors and power tillers;
(g) Supply of jigs, tools and fixtures for Projects enumerated at (a), (b), (c), (d) and
(h) Supplies for the production Programme of the High Pressure Boiler Plant at Tiruchirapalli, the Heavy Power Equipment plant at
Ramchandrapuram, the Heavy Machine Tools Plant at Ranchi and the Walchandnagar Industries for manufacture of cement plants. These
would include knocked down deliveries, sub-deliveries and other items which have been worked upon prior to despatch to India, but
would exclude raw materials;
(i) Such other industrial Projects and Programmes as may be agreed upon between the two Governments.
It has also been agreed between us that the above list of Projects and Programmes may be amended by mutual agreement.
I shall be grateful if you would kindly confirm that this sets out correctly the understanding reached between us.”
I confirm that the above correctly sets out the understanding reached between us.
Mr. Y.T. SHAH,
Leader, Indian Economic Delegation,