India - Tenth Industrial Credit and Investment Corporation Project

FiLE Ct0'U-hm DOCUMENT OF INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT Not For Public Use Report No. P-1269-IN REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN TO THE INDUSTRIAL CREDIT AND INVESTMENT CORPORATION OF INDIA LIMITED WITH THE GUARANTEE OF THE GOVERNMENT OF INDIA May 24, 1973 This report was prepared for official use only by the Bank Group. It may not be published, quoted or cited without Bank Group authorization. The Bank Group does not accept responsibility for the accuracy or completeness of the report.  CURRENCY EQUIVALENTS (as at May 11, 1973) US$1.00 = Rupees (Rs)7.6* Rs 1.00 = US$0.133 Rs 1 million US$132,000 India has not declared a new par value following the devaluation of the US Dollar. The Rupee is officially valued at a fixed Pound Sterling rate; and, as the Pound is now floating relative to the US Dollar, the US Dollar/Rupee exchange rate is subject to change. The Appraisal Report was based on an exchange rate of US$1 to Rs 7.5. FISCAL YEAR April 1 - March 31  INTERNATIONAL BANK FOR RECONSTRUCrION AND DEVEOPMENT REPORT AND RECOMNENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN TO THE INDUSTRIAL CREDIT AND INVESTMENT CORPORATION OF INDIA LIMITED WITH THE GUARANTEE OF THE GOVERNMENT OF INDIA 1. I submit the following report and recommendation on a proposed loan to the Industrial Credit and Investment Corporation of India Limited (ICICI) with the guarantee of the Government of India for the equivalent of US$70 million to help finance ICICI's operations through the end of 1975. The terms of the loan would be an interest rate of 714 percent per annum, and repayment according to the amortization schedule of sub-projects up to a maximum of 15 years, including three years of grace. PART I - THE ECONOMY 2. The economy of India is dealt with in paragraphs 2-14 of the President's Report of the same date on a proposed development credit to the Government of India for an Eighth Industrial Imports Project (Report No. P-1268-IN of May 24, 1973). A Country Data Sheet is attached in Annex I. PART II - BANK GROUP OPERATIONS IN INDIA 3. The proposed loan would be the Bank's forty-first operation in India bringing the total of Bank funds committed to US$1,180 million. For a review of Bank Group lending in India, reference is made to paragraphs 20-2t of the President's Report of the same date on the proposed Eighth Industrial Imports Project. Annex II contains a summary statement of Bank Group operations as of April 30, 1973, and noteson the execution of on- going projects. 4. It is clear from the review of Bank Group operations in India, to which reference has just been made, that as much as possible of India's external capital requirements should be provided on concessionary 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 modest Bank lending to India is appropriate so long as the Bank's net investment in India is not increased thereby. As of April30, 1973, the loans to India held by the Bank totalled US$537 million, ol wnich US$61 million remained to be disbursed leaving a net amount outstanding of US$476 million. Considering the scheduled repayment of principal, which in Fy 1973 will amount to some US$ 49 million, and the expected pattern of disbursements, the proposed loan would not lead to an increase of the Bank's net investment in India above the present figure.  PART III - INDUSTRY 5. Reference should be made to paragraphs 25-32 of the President's Report of the same date on the propcsed Eighth Industrial Imports Project. A further note to that President's Report is added below on financial institutions in India. 6. The industrial sector is served by a number of financial institu- tions. On a national level there is the Industrial Development Bank of India (IDBI), the Industrial Finance Corporation of India (IFCI), and ICICI, the beneficiary of the proposed loan. At the states level there are State Financial Corporations (SFCs) and State Industrial Development Corporations (SIDCs). The first three national institutions are primarily engaged in term lending and their assistance has been directed mainly to medium and large scale enterprises. IDBI, an affiliate of the Reserve Bank of India, acts as a lender of last resort in its direct operations which have been concentrated in the modern industrial sectors. Its indirect operations com- prise refinancing of loans and rediscounting of b-ills from industrial enter- prises. Overall, IDBI is the largest source of term-loans for the sector and its operations have accelerated rapidly over -the past two years, with approvals in 1971/72 reaching Rs 1.43 billion. An important function of IDBI is to aid small-scale industry which IDBI does through discounting loans made by SFCs to small enterprises. Hitherto, as IDBI did not have access to foreign exchange resources, small enterprises faced considerable difficulty in meeting their foreign exchange needs. IGICI was able to pro- vide some,but only very limited,assistance. In January 1973, DA extended a credit of US$25 million to IDBI to meet the foreign exchange cost of SFC financed projects and this credit should greatly assist the small-scale sector. 7. IFCIE, which is half-owned by IDBI and half by other financial institutions, also provides foreign currency loans; its specialty is financing cooperatives, mainly sugar and cotton. Approvals have totalled about Rs 300 million per annum over the past three years but only one-third has been available for import financing. These figures compare with ICICI's approvals of Rs 524 million in 1972, the majority of which were for loans to finance imports. Commercial banks, the Life Insurance Corporation (LIC), and the Unit Trust of India (UTI), also provide long-term finance. The latter two primarily underwrite new issues and invest in industrial shares and debentures. 8. At the stateslevel, the SFCs and SIDCs are the most important industrial financing institutions. Total loans approved by the SFCs have increased sharply, reaching Rs 6h0 million in 1971/72. The bulk (about 70 percent) of the SFC's assistance has been to the small-scale sector. SIDCs have also been providing term loans at an increasing rate but their main task has been promotional activities.  - 3 - PART TV - THE PROJECT 9. The Bank has been closely associated with ICICI since its foundation in l955. The proposed loan would be the Bank's tenth to ICICI and would bring the total amount of lending by the Bank to ICICI to US$3335- million. 10. The project was appraised in January/February 1973 and the Appraisal Report (No. 142-IN of May 21, 1973) is being distributed to the Executive Directors separately. Negotiations were held in Washington from May 10 to May 16, 1973. The borrower was represented by Mr. S. S. Mebta. Managing Director, and Dr. P. Medhora, General Manager, of ICICI. The GOI as Guarantor has reviewed and approved the proposed loan documents. A project and loan summary is attached as Annex III. Role, Ownership and Resources 11. ICICI is the principal source of foreign exchange for industrial projects in the Indian private sector, where its role is the promotion of large and medium scale enterprises. Ownership of ICICI is dominated by public sector corporations including the Life Insurance Corporation of India, Unit Trust of India and a number of commercial banks which were nationalized in 1969, and altogether these institutions hold 64 percent of ICICI's capital. Foreign shareholders, mainly banks, hold 25 percent, while the balance of 11 percent is held by private Indian investors. The Bank has been the most important source of ICICI's funds,having provided up to end of December 1972, 55 percent of its total resources and 84 per- cent of its foreign currency resources. Other sources of foreign currency have been USAID, Kreditanstalt fur Wiederaufbau (KfW) and the Overseas Development Administration of the United Kingdom. Rupee funds have been mobilized mainly through the public sector, initially from the Government and later the Industrial Development Bank of India (IDBI), through share and debenture issues, and through internally generated resources. Recently, in March 1973, ICICI successfully floated its fourth and largest debenture issue for Rs 80 million. Management and Board 12. ICICI continues to be well-managed and to operate effectively. Mr. H. T. Parekh, who has been with ICII since its inception, is Chairman and Chief Executive. Mr. S. S. Mehta, who had previously been Assistant General Manager and then General Manager, has recently been appointed Managing Director. A number of other senior staff changes have also been made, all from within the organization, thus preserving vital con- tinuity and demonstrating ICICI's ability to br-ing forward competent and experienced staff. The board of ICICI comprises 15 directors of whom six are private industrialists, three are from public financial institutions, two represent foreign shareholders, two represent GOI while the remaining two are officers of ICICI (the Chairman and Managing Director). ICICI maintains a close relationship with GOI,while still retaining operational autonomy.  Operating Policies and Procedures 13. ICICI's policy is to promote primarily large and medium scale enterprises within the framework set by Government industrial policy. A major objective is to assist enterprises using newer technologies and in this it has been successful. ICICI has also placed emphasis upon enterprises which are export oriented. Investment policy is directed towards meeting the long-term financing requirements of projects. In addition, the underwriting of share issues is undertaken, especially for new industrialists who would not otherwise have been able to go to the market. In July 1972, a merchant banking cell was established with a view to providing a range of financial services and in particular to advising enterprises in obtaining industrial licences. 1L. ICICI's investigations into projects continue to center on the technical and financial aspects of appraisal. As before these aspects are generally well handled. Management and market aspects are also adequately covered although more attention is required on organizational arrangements for successfully realizing sales prospects at home and abroad. In 1971 and 1972, an effort was made to improve appraisal work by intro- ducing probability analysis and by providing a better integration of the project into its wider industrial context. Overall, ICICI's appraisal work continues to be of good quality. Some new suggestions on the application of economic criteria were proposed during negotiations (para. 23). Follow-up procedures and project supervision are satis- factory. Some strengthening of thbeFollow-Up Department is needed and ICICI has proposed staff increasesto meet its needs. 15. 1CICI's interest rate for loans to finance imports was increased in December 1972 from 9 percent to 9..5 percent per annum. However, the standard rate for rupee loans has been maintained at 8.5 percent per annum in view of local money market conditions. A commitment fee of one percent per annum on undisbursed amounts of loans is also levied. ICICI generally insists that its clients procure equipment on the best terms and requires them to obtain quotations from firms of international standing in different countries. Bids are carefully evaluated and procurement procedures are sound. Portfolio and Financial Results 16. ICICI's portfolio is in satisfactory condition and its liquidity is good. In particular, the repayment performance of borrowers has improved over the past two years with the percentage of loans affected by arrears declining from 12.4 percent at the end of 1970 to 8.2 percent at the end of 1972; part of this improvement has been attributable to rescheduling. The amount of principal actually in arrears amounts to 2.75 percent of the loan portfolio. The investment portfolio, comprising equity and debentures in industrial enterprises, represents 16.5 percent of ICICI's total assets. About 90 percent of these investments are in quoted companies.  17. Profits before taxes increased by 9.5 percent in 1972 despite a narrowing of ICICI's interest spread as a result of the rising cost of borrowing. ICICI's debt/equity ratio was 7.8:1 at the end of 1972 compared with the ceiling set in the previous Bank's loan agreement of 9:1; this ceiling will be retained under this proposed loan. Debt service coverage at 1.24:1 is satisfactory and it is notable that ICII has been able to increase its total reserves and provisions further from -6.5 percent of the loan and investment portfolios at the end of 1970 to 7.0 percent at the end of 1972. Past Operations 18. The sectoral distribution of operations continues to be wide. Chemicals, petrochemicals, ferrous metal products, and engineering goods remain prominent,, while increased or new lending has taken place recently for shipping as well as pulp and paper. ICICI-assisted projects account for substantial portions of the country's manufacturing capacity in some leading industries like synthetic rubber and electrical machinery. They have contributed significantly to employment creation and have generated satisfactory net benefits to the economy as indicated by a detailed sample analysis of ICICI-assisted and completed projects (para. 22). 19. Operations tend to be heavily concentrated in the established industrial centers of Gujarat and Maharashtra and attempts to achieve a more diversified geographical distribution have not proved very successful de- spite Government incentive schemes. Recently, ICICI participated in surveys of the industrial potential of several backward states and has already financed a few projects following from these surveys, but ICICI wishes to intensify its efforts to identify and promote new projects in these areas. 20. Over the past two years ICICI's operations have continued to expand with an increase in loan approvals of 12 percentjinLnl971 and_of a further 29 percent in 1972. The major share of approvals (63 percent in 1972) continues to be for foreign exchange for imported equipment, but approvals for rupee lending increased very sharply and in 1972 reached double the level of 1970. This increased activity is a reflection of the, rasing con- fidence on the part of the private sector in the longer term prospects of the economy. This confidence is further reflected in the pronounced increase in actual disbursements of foreign currency loans which went up from an average of US$30 million per annum in 1970 and 1971 to US$36 million in 1972. Also, whereas disbursements under earlier Bank loans, the Sixth (Loan 414 of May 1965) and the Seventh (Loan 515 of September 1967) were slow and only now are within sight of completion, the Eighth (Loan 683 of June 1970) has been fully coimitted and the Ninth (Loan 789 of October 1971) is almost fully committed; disbursements of both these last two loans are running well ahead of the original forecasts.  Projected Operations and Rescurces 21. The evidence of rising investment demand referred to in Part III, and the acceleration in activity noted in para. 20 above, all point to an increased need for imported capital goods. This need is reflected in the firm project pipeline which ICICI already has. It is estimated that ICICI will require foreign exchange commitment capability of US$112 million for the period September 1973 through the end of 1975. The proposed loan of US$70 million would meet the major part of this requirement. Funds are also expected from KfW and UK lines of credit, in addition to which ICICI intends to place, with the approval already granted by GOI, its first loan in the Euro-market. For some time, ICICI has been anxious to diversify its sources of funds and in particular, to establish itself as borrower in foreign capital markets. The proposed placement will be the first of a series. Joint ICICI-Eank Special Study 22. A point of special interest is the joint ICICI-Bank Special Study to analyze ICICI's contribution to India's economic development. The specific objectives of this study are to assess the development impact of ICICI financed projects through estimates of economic rates of return, and to evaluate ICICI's role in resource mobilization. The study will also include an evaluation of the methodology used and the practical problems encountered in assessing the developmental impact of ICICI. Preliminary results based on a representative sample of 42 completed projects show that three quarters of ICII assisted projects yielded an internal rate of return of over 12 percent and half the projects yielded more than 20 percent. While the results so far show that the capital/output ratio has declined marginally, most of IICI's borrowers are investing in projects averaging Rs 40,000 (about US$5,000) for each new job created. 23. An important function of this study is to increase the attention given to economic aspects of project appraisal. Whereas ICICI has developed considerable competence in the examination of engineering and financial aspects of project proposals, ICICI is anxious to refine its approach. This subject was discussed during negotiations, and agreement was reached on such a refinement and on the use of economic analysis as a regular part of ICICI's appraisal work. Proposed Loan 24. ICICI remains a creditworthy borrower and it is a financial intermediary through which the Bank can continue to play an important role in providing assistance to Indian industry. The amount of the loan has been proposed in relation to ICICI's financing requirements. The use of the proposed loan would be limited to expenditure abroad; the terms would follow those of recent Bank loans to development finance companies, including the standard commitnent charge. As in the previous loan, only those projects which need more than US$4T million of ICICI's resources, including Bank funds, will require the approval of the Bank.  - 7 - PART V - LEGA-L INSTRUMENTS AND AUTHORITY 25. The draft Loan Agreement between the Bank and the Industrial Credit and Investment Corporation of India, the draft Guarantee Agreement between India and the Bank the Report of the Committee provided for in Article III, Section 4(iii5 of the Articles of Agreement and the text of a Resolution approving the proposed loan are being distributed to the Executive Directors separately. There are no special conditions of effectiveness and the draft agreements conform to the normal pattern for loans for development finance companies projects. 26. I am satisfied that the proposed loan would comply with the Articles of Agreement of the Bank. PART VI - RECOMMENDATION 27. I recommend that the Executive Directors approve the proposed loan. Robert S. McNamara President Attachments May 2h4 1973   ANNEX I Page 1 COUNTRY DATA - INDIA AREA POPULATION DEN4SITY 5,268,580 km2 577 million (mid-1973) 177 per kmo Rate of growth: 2.2356/ (from 1961 to 1971) 350 per km 2f arable land POPULATIUN CiARACTERIST1CS (1971) HEALTH Crude Birth Rate (per 1,000) 38 (eat) Population per physician (1971) 4,000 (est) Crude Death Rate (per 1,000) 16 (est) Population per hospital bed (1968/69) 1,826 Infant Lortality (per 1,000 live births) 120-140 (eat) ItCOIE DISTRIBUTION (1967/68) DISTRIBUTION OF LAND OWNERSHIP (1954/55) ' of consumption, lowest quintile rural k6 (est) urban 7/5 (est) i owned by top 7/% owners 5256 (est) of conoumption, highest quintile rural 4170 (est) urban 44% (est) 51 owned by smallest 25% of owners 15 (est) ACCESS TO PIPED WATER (1971) ACCESS TO ELECTRICITY (1971) y: of population - urban 70$o (eat) 3% of population - urban 100 (est) p of population - rural 551 (est) 5o of population - rural 25 (est) NUTBITIGI (1960 - 69) EDUCATION Calorie intake as 51 of requirements 83 (est) Adult literacy rate to (1971) 36 Per capita protein intake (gr. per day) 55 (est) Primary school enrollment 7; (1969/70) 79 GNP PER CAPITA IN 1970 : US Y 110 GRUSS NATIONAL PROLUCT IJ 1972/73 ANNUAL RATE OF GROWTH (%. constant prices) US $ Bln. 7 1961/62-1965/66 1965/66-1969/70 1970/71-1972/73 GUP at Market Prices 63.6 100.0 3.3 4.7 2.0 Gross Domestic Investment 9.3 14.6 Groso .lutlonal Saving 8.6 13.5 Current Aocoot Balance 0.7 1.1 Resource Gap 0.5 0.8 OUTPUT. LABOR E'ORCE AND PRiODUCTIVITY IN 1971 Value Added (at factor cost) Labor Force V.A. Per Worker US S Blo. ~ MAE. Es US 4 Bn of Rational Averaare Agriculture 19.4 42.6 129.9 72.0 149 47 Industry 13.3 23.3 20.2 11.2 658 208 Ser,ices 24.3 34.1 30.2 16.8 805 255 Total/average 57.0 100.0 180.3 10.0 316- "OVERNKIUiT FINANCE e/ General Government Central Government (Es. Bin) of GDP (Rs. Bln) Aof GDP 1971/72 1971/72 1968-71 1971/72 1971/72 1968-71 Current Receipts 70.30 16.4 14.9 40.28 9.4 8.5 Current ixpenditures 71.64 16.7 14.6 41.28 9.6 8.1 Current Surplus/Deficit - 1.34 - 0.3 0.3 - 1.00 - 0.2 0.4 Capital Expenditures 35.66 8.3 7.8 29.25 6.8 6.o External Assistance (net) 3.25 0.8 1.1 3.25 0.8 1.1 LI Population of 10 years and over; extracted from 15% sample data of the 1971 Census. LI Officoal estimate' probably overestimates actual enrollment of age group 6 - 11 by one-fifth. a/ The per capita GNP estimate is at 1970 market prices, calculated by the same conversion technique as the 1972 World Atlas. All other conversions to dollars in this table are at the average exchange rate prevailing during the period covered. d/ Ehstimates. e/ Transfers between Center and States have been netted out.  ANNEX I Page 2 COUNTRY DATA - INDIA vO:;oY, Y HRDIT Ai;D PhlCsS 1965/66 1969/70 1970/71 1971/72 October 1971 October 1972 ( ill ion Rs outstanding at end of period) toney and Gaasi Money 61.4 93-5 105.6 122.3 113.7 150.4 aran Credit to Public Sector 40.6 52.4 56.9 69.0 64.0 77.5 b_nK Credit to Prioate Sector 26.1 48.3 56.7 64.4 59.9 64.3 (Percentages or Index liumbers) 196i/66 1969/70 1970/71 1971/72 February 1972 February 1975 1,ouev and iu.asi Money as 5; of GDP 24.2 24,3 24.8 26.5 Whole-al Reice Iindex (1961/62-iDO) 137.5 175.7 isO.6 192.2 191.2 217.2 Ann.ual pcnrc,tae changes in: Whceols-e Pric Indes 12.4 6.4 2.8 6.4 13.6 honk Credit to Public Sector 12.9 1.5 6.6 21.3 c-.l Cre-dit to brovate Sector 12.6 15.1 17.4 13.6 5.LA:.CE OF PAn,O.INTS _''9/70 _970/71 1971/72 B:.CHAiDISlg EXPORTS (AVERAGE 1969/70-1971/72) (Million Us $) US S Illn. 5 Exp:rt of Goods 1,,84 1,950 2,100 jute Manufactures 291 15 imoorto of Goods ','109 2,179 2,431 Tea 188 9 Trade ba lance - '25 - 22!) - 330 Cotton Textiles 161 8 .FS (cet) 13 - 7 ns. Iron Ore 139 7 :iesou-ce Gt -12 - 236 n.a. Engineering Goodn 156 7 Interest Paysents (net) - 192 - 21 n.a. -Tota 1,06e 100 Ltner Factor Payments (n,et) - 15 - 20 n.e. 1let Prcnsfers 79 83 n.a. ralance on Current Account - 340 - 387 n.. iXTEFUiAL DEBT. March 31. 1971 uffoci,,1 lAd (incl. grants)US ln Repayable in foreign currency 7,771 iiissorsaaents '., L88 1,096 1,030 Repayable through export of -o-roizatlon '57 - 387 goods 782 Dirct Fcioreign investment ) - .88 - 558 n.e. Total Outstanding 8,553 ither Canto1 (net) ) ;11 Uther items ) DEBL SERVICE RATIO FOR 1971/72 30.6 percent I-crease I. Reserves (+) 03- - 237/ 3 Gross Reserves (end year) 1,CS5 1,052 1,27/ let Reserves (end year) (12 1,0'2 1,277 IBRD/IDA LENDING. April 34 1973 (US6 Mi-n. hA2L;' CF i XCNaEGE Prior to mid-December 1971 US S 1.00 - Rs. 7.5 IBRD IDA Rs. 1.00 - US 5 0.135333 Outstanding and Disbursed 476 1374 mid-December 1971 to US j 1.00 - Rs. 7.27927 Undisbursed 61 731 end Jlne 1972 Rs. 1.00 - US 50.137376 Outstanding ncl. Undisbirsed 537 2105 After end June 1572 3 Floatirng Rate Spot Rate ( 3orth 51, 1975) 1 approx. US 5 1.00 - Rs. 7.59 approx. Rs. 1,00 - US $0.13 j Allocations of SDR's and valuaticn changes resulting solely from changes in exchange rates and the gold purity of the US dollar are treated here as exogenous to the balance of payments. _/ Amortization a d interest payments as a percentage of merchandise exports.  ANNEX II Page 1 THE STATUS OF BANK-GROUP OPERATIONS IN INDIA A. STATEMENT OF BANK LOANS AND IDA CREDITS (As of April 30, 1973) US$ Million Loan or Undis- Credit No. Year Borrower Purpose BANK IDA bursed 33 Loans/ 24 Credits fully disbursed (net of Cancellation) 876.4 1143.1 307-IN 1961 IISCO Coal Mining 19.5 - 1.7 414-IN 1965 ICICI Industry DFC VI 48.3 - 1.1 89-IN 1966 India Beas Equipment - 23.0 2.8 515-IN 1967 ICICI Industry DFC VII 24.6 - 1.0 6114-IN 1969 India Tarai Seeds 13.0 - 9.9 615-IN 1969 India Telecommunications III 27.5 - 1.9 176-IN 1970 India Kadana Irrigat;ion - 35.0 20.5 683-IN 1970 ICICI Industries DFC VIII 40.0 - 6.7 191-IN 1970 India Gujarat Agricultural Credit - 35.0 8.2 203-IN 1970 India Punjab Agricultural Credit - 27.5 27.5 226-IN 1971 India Andhra Pradesh Agri. Credit - 24.4 14.1 230-IN 1971 India Agro-Aviation - 6.o 6.0 241-IN 1971 India Telecommunications IV - 78.0 67.3 242-IN 1971 India Pbwer Transmission II - 75.0 74.9 249-IN 1971 India Haryanad Agricultural Credit - 25.0 20.5 250-IN 1971 India Tamil Nadu Agricultural Credit - 35.0 29-.9 264-IN 1971 India Cochin II Fertilizer - 20.0 267-IN 1971 India Wheat Storage - 5.0 5.0 268-IN 1971 India Pochampad Irrigation - 39.0 2X.8 789-IN 1971 ICICI Industry DFC IX 60.0 - 3.9 278-IN 1971 India Myjsore Agricultural Credit - 40.0 34-9 279-IN 1971 India Gorakhpur Fertilizer - 10.0 9.4 280-IN 1971 India Railways XI - 75.0 31.7 293-IN 1972 India Maharashtra Agricultural Credit - 30.0 25.4 294-IN 1972 India Bihar Agricultural Markets - 14.0 14.0 312-IN 1972 India Population - 21.2 21.2 327-IN 1972 India Industrial Imports VII - 75.0 I8.7 328-IN 1972 India Shipping - 83.0 67.8 342-IN 1972 India Education Project - 12.0 12.0 * 356-IN 1972 India IDBI - 25.0 25.0 * 357-IN 1973 India Fertilizer-Nangal - 58.0 58.0 377-IN 1973 India Power Transmission III - 85.0 85.0 * 378-IN 1973 India Mysore Aericultural Markets - d. 8.Q * Total (less cancellation) 1,109.3 2,107.2 of which has been repaid 571.0 2.3 Total now outstanding 538.3 2,104.9 Amount sold 111.5 of which has been repaid 109.7 1.8 Total now held by Bank and IDA 536-5 2,104-9 (prior to exchange adjustments) Total undisbursed (including *) 61.2 3i-O 792.2 * not yet effective  ANNEX II Page 2 B. STATEMENT OF IFC INVESTMENTS (as of April 30, 1973) 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 Mahindra Ugine Steel Co. Ltd. 2.3 1.0 3.3 1964 Lakshmi Machine Works Ltd. 1.0 0.3 1.3 1967 Jayshree Chemicals Ltd. 1.0 0.1 1.1 1967 Indian Ecplosives Ltd. 8.6 2.9 11.5 1969-70 Zuari Agro-Chemicals Ltd. 15.1 3.8 18.9 TOTAL 33.5 8.8 42.3 Less sold, repaid and cancelled :7.4 1.4 18.8 Now held 16.1 7.4 23.5 Undisbursed 1.8 0.6 2.4  ANNEX II Page 3 C. PROJECTS IN EXECUTION 1 Ln No. 307 Indian Iron and Steel Company; US$19.5 million loan of December 22, 1961; Closing date: December 31, 1973 This loan was made in 1961 and the original closing date was January 31, 1967. The implementation of the project has been affected by technical and managerial difficulties connected with the opening of new collieries to supply IISCO's steel plant. The Bank, together with technical consultants, has been providing constant supervision and progress is being made in resolving the tech- nical issues. On the managerial side, the Government of India announced on July 20, 1972, that it was taking over the management of IISCO for two years. The Government has assured us that this action will not interfere with IISCO's obligation to the Bank. On April 30, 1973, US$1.7 million remained undisbursed of which about US$1 million has been earmarked for equipment on order and technical services, while US$0.7 million may be cancelled by the closing date of December 1973. The Bank has approved some increase in short-term indebted- ness as well as a rehabilitation program and has also agreed in principle to a reduction in the Bank's mortgage cover. Ln No. 414 Sixth Industrial Credit and Investment Corporation of India Project; US$48.3 million loan of May 28, 1965; Closing date: June 30, 1973 Ln No. 515 Seventh Industrial Credit and Investment Corporation of India Project; US$24.b million loan of September 10, 1967; Closing date; December 31, 1973 Ln No. 683 Eighth Industrial Credit and Investment Corporation of India Project; US$40.0 million loan of June 3! 1970; Closing date; September 30, 1974 Ln No. 789 Ninth Industrial Credit and Investment Corporation of India Project; US$60.0 million loan of October 2 1971 Clons date: December 31, 1976 These loans have supported industrialization in India through a well-established development finance company. There have been delays in disbursements on the two earliest loans 414-IN and 515-IN as a result of the business slowdown in the years following 1967. The original closing date of June 30, 1970, for 414-IN has been extended three times to June 30, 1973 and 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 understanding that they do not purport to present a balanced evaluation of strengths and weaknesses in project execution.  ANNEX II Page 4 that for 515-IN twice, from December 31, 1971 to December 31, 1973. Loan 683-IN ;.a2 been fully committed as of December 31, 1972. Disbursements under Loan 789-DN rte ahead of schedule. C No. 89 Beas Equipment; US$23.0 million credit of June 29, 1966: Closing date: December 31, 1973 The purpose of this credit is to provide part of the foreign ex- change cost of imported equipment and services required to develop hydro- electric power from the Beas River, to extend irrigation in the Punjab and Ralasthan and for associated construction works. The project, which has been subject to some delays, is Dart of a larger scheme for the integrated develop- ment of the eastern rivers of the Indus Basin. The balance of the credit out- standing is to be spent on items scheduled for delivery up to December 31, 1973, and as a result, the original closing date of December 31, 1972, has been postponed by a year. Ln No. 614 Tarai Seeds; US$13.0 million loan of June 18, 1969; Closing date: December 31, 19 This loan to the Tarai Development Corporation is to assist in the development of seeds of high yielding varieties of crops. The Association has approved plans for the expansion of an existing seed processing plant and construction of a new plant. Orders have been placed for the equipment re- quired for the former and tenders for equipping the latter plant have been readvertised following rejection of earlier bidding as unresponsive. A major difficulty has arisen becauise of a lack of response to tenders for land-levelling. This problem is being overcome through demonstrations under field conditions in the project area for contractors. A proposal is curently under discussion', which would permit contractors to purchase imported equipment of their choice for land- levelling. Ln No, 615 Telecommunications III; US$27.5 million loan of June 18, 1969; Closing date: June 30, 1973 The project, which was financed 50 percent by a Bank loan and 50 percent by an IDA credit (153-IN),was designed to assist in financing the telecommunications expansion program for the first three years of the Fourth Pl&n oeriod (1969-1972). Credit 153-IN was disbursed fully three months prior tc 2:he closing date, but the closing date for Loan 615-IN has had to be post- poned froin December 31, 1972, to June 30, 1973. Although disbursements have -taken place broadly in line with the original schedule, there have been de- lays in meeting project targets of about six months for local exchange installations and up to two years for some long distance works, resulting from difficulties exDerienced by local factories and foreign delivery delays of some key it-'