Transcript of one hundred twenty-second special meeting of Executive Directors, held on Tuesday, December 18, 1956 : India - Second Indian Iron and Steel Company Expansion Project

STRICTLY CONFIDENTIAL 89706 INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT ETK ONE HUNDRED TWENTY-SECOND SPECIAL MEETING of EXECUTIVE DIRECTORS Board Room International Bank Building I Washington, D. c. Tuesday, December 18, 1956 I I The meeting was convened at 10:00 o'clock a.m., Mr. EugenJ I I Black, President, presiding.  ·1 I 2 STRICTLY CONFIDENTIAL Proposed Loan - India Loan Aspects Mr. Basch 3 Technical Aspects Mr. Ripman 16 II  3 STRICTLY CONFIDENTIAL PROCEEDINGS ----------- MR. BLACK: The purpose of this special meeting is to consider the report and recommendations on the proposed loan of 20 million dollars to the Indian Iron s.nd Steel Company. I would like to first call on Mr. Basch. MR. BASCH: Mr. Chairman, gentlemen, four years ago, on December 18, '52, an agreement was signed to make a loan of $31-1/2 million with the Indian Iron and Steel Company to help: fine.nee its expansion program. It is rather inviting to compare the situation at the tim~ with that one which is at present. When we negotiated the '52 loan, tqe company in addition ~~~ I to our loan had to get an advance from partt~a'h-fUnd/ of I 20 million dollars and to secure a loan from the Government ofl 16 I India of Wmi llion dollars. ! In addition~ negotiations, the Government undertook to provide any additional funds which would be needed for the ! completion of the project or satisfactory working capital. Th~ production of the company at the time was about 250 up to 280 ~ thousand de-llars .- In the last two years, the position of the company has changed greatly, due mainly to improved operating efficiency. Production has increased to 450,000 tons of steel as compared 3-6'0. cr::'O"- i with the rated capacity of 53--;-000 tens. I The company has utilized only one-half of the government  4 STRICTLY CONFIDENTIAL loan and decided not to draw on the rest of the government loan. The company did not need to use any or the overdraft facili- ties which were available by the banks, and the company can now start a new expansion program which will result in a further strengthening of its position, and on the completion of the program the company will produce less billets, more structur~ rail and bars, and will sell less pig iron than was proposed in the program in 1952. The present expansion program or the company is a part of the government plan to increase production of steel from 1.3 at present to 4-l/2 million tons by 1960, 1 61. About one-hal1 of this volume will be produced by the two private companies, I ! .. Tata Iron and Steel Compapy and Indian Iron and Steel Company~ .1 .i The other half wi 11 be produced by three government plants or! I I I 'i mills now being constructed, one German, one Russian, and one I English. The German first was contemplated to have active par- ticipation by the German combined group. According to the news which we got just in the recent days, it was decided not/ to have any ~participation because it was found to be I I ! I very costly and it will be only government-owned plant. Ii,I 1 i11 For the second plant, the Russian plant, the Soviet UnioJ !! I :1 I l1 is advancing a credit of about 130 million dollars. For the II _,/~ ~ J i/ British plant, the Government or th,~m has secured a :1 j! i  5 STRICTLY CONFIDENTIAL loan of 15 million pounds, and the Bank syndicate a loan of JI ~1/2 million pounds. The total investment in the Government plants is nearly 750 million dollars, for which credits of less than 200 million dollars have been secured. The loan documents, as you have seen, conform to the normal pattern of the Bank's loan and guarantee agreements. I should like to mention here one point: When the 1952 loan agreement was negotiated, there was a first mortgage on the physical property and floating charge on the remainder of ~ the company's assets which was e..s ta"bl:ie.ReEi on the trust deed in favor of the first mortgage debenture holders, so-called sterling dbentures. It was arranged later on that the Bank ~~ security established OR tAeir tz:ust deed with Bfaring Brothers ~< Limited will range..-pari passu with the sterling debentures security. Now because of its improved financial position the company has decided, and the Government of India has agreed, . or(-~ to redeem~advance e-pper9'Mi..,,- a~l the sterling debentures. 1 The proposed loan and the bonds issuable under it would ~~~ be secured by a mortgage{\Snd ranlAng pari passu with the mortgage and charge constituted by the 1954 trust deed. I The new trust deed~e 1954 tr~st deed, shall constitute! i security for the proposed loan and bonds and for the first loSJjl I I , and bonds issued thereunder. I  6 STRICTLY CONFIDENTIAL The various mortgages and charges in favor of the Govern- ment of India and the State Bank of India will be further ~ per teer. There is another feature. Similarly as in the case of the loan to Tata Iron and Steel Company, the borrower will be allowed to draw on the loan up to six million dollars before the security arrangements have been completed. The company started placing orders in June this year. It is proposed that reimbursement be made for expenditures made since June 30, 1956. The total amount spent at the end of November this year would amount to slightly more than one and one-half million dollars. The total am.oun t of orders I placed since the end of November is about 11.3 million dollars!, I I of it, roughly six million dollars in U. s. dollars, about 2.~ in Germany and 2.5 in Great Britain. I ! I The remainder of the contracts will most likely be placed/ in these three countries. The exact amounts of it ve don't lmow. Finally, I should lik:e to mention that the report of the ~an Committee has been duly executed. Thank you. MR. BLACK: Thank you, sir. Mr. Ripman. MR. RIPMAN: Mr. Chairman, as Dr. Basch has mentioned,  ,, 7 STRICTLY CONFIDENTIAL this is the second project which the company has asked us to finance, and it is designed to increase the output of rolling products by about D0,000 tons which can be achieved without any further expansion in the pig iron and steel making facili-1 t1.es. The progress achieved during the last two years on the I I I works financed under the Bank's first loan has been impressive!, I especially when you take into account the difficulties involveU in expanding an axis ting plant. I Not only has production not been hindered by the con- I struction work, it has actually increased very considerably I ! beyond what was regarded as the rated capacity of the plant tw·o years ago. Much of the credit for this impressive achievement during th.a last two years must go to the very ab le general manager at Burnpur, Mr. McCracken. I had the opportunity about three weeks ago of visiting I the plant, and the iron ore mines which be long to the company I at Gua, and I discussed at length with Mr. McCracken end with ~ 1 pa.rtner of the consulting engineers the progress which was ! being made on the works now under construction and the prospec~ of their being finished on time. It seems probable that the works now being constructed i.r ' i would be able to be finished on time so that the first new bla~t ' i furnace will come into production in November next year and th~ I  8 STRICTLY CONFIDENTIAL second one approximately a year later. There is one possible difficulty here, and that lies in the transportation field, partly the transportation delays involved in the closures of the Suez Canal and partly difficul- ties with inland transport. There have been occasions on which it has taken longer to move imported equipment from the docks at Calcutta to the work~ I at Burnpur, less than 200 miles away -- it has taken longer to: make that move than for the equipment to come from Europe to Calcutta. I As far as the mechanization of the iron ore mines is con-i! I i earned, there have been certain difficulties here, and as a I I result it is not now expected that full production on a me chanli - : I I cal basis will be ~chieved until some six to eight months afte~ I the new blast furnace comes into operation. I I I For some months past, in consequence of this, the company I has been increasing production of ore with its present rather 11, I primitive methods and is building a stockpile of iron ore at I I the works at Burnpur which should compensate for the delay in mechanized production. I The works comprising the second project are a logical I extension of the company's present rolling facilities. They 4e well designed to increase the output of salable steel, and I I they should make a sensible contribution to the company's I I earnings.  9 STRICTLY CONFIDENTIAL It is likely that ocean transportation will continue to raise problems, but we do not at present feel that these are so serious that they will jeopardize the success of the project and its punctual completion. The inland transportation situation gives us some anxiety, not only because of the importance now of reducing these de- lays and shifting imported equipment from Calcutta to the works but also because the development of the steel industry in this whole area of India depends for its success on the capacity of! the railways to develop their facilities to meet the growing traffic which will be generated by the new steel plants. We shall keep in close touch with the railways to watch the progress being made in this connection. The management ofl I the company is experienced, competent, and astute. The arra.n~- ments which have been made with consulting engineers for de- ! signing the plant for the supervision of construction and for procurement are satisfactory. The market studies which we have made indicate that the company should not have difficulty in selling its increased i production. Its financial position is excellent and conserva-1 tive forecasts show that its financial prospects are also very1 I i i good. l i In the circumstances we have no hesitation in recommendin$ this project tor financing. MR. BLACK: Thank you.  10 STRICTLY CONFIDENTIAL Are there any questions? Mr. Warren. MR. WARREN: Mr. Chairman, in your report you refer to the $20 million or the equivalent thereof in currencies other than dollars, but I think I hes.rd Mr. Be,seh say that some six million of it would be in dolls.rs. MR. BLACK: As I understand it, nine million dolls.rs equivalent of this loan is needed for purchases in the UK. Seven million dolls.rs equivalent is needed for purchases in Germany •. That leaves four million dolls.rs. MR. BASCH: Seven in the u. S., four in Germany. MR. BLACK: I beg your pardon. Four million dollars in Germany and seven million dollars in the u. S. Those are the orders that have been placed. MR. WARREN: So that the loan vill be partially in dollars. MR. BLACK: We don't know what the loan will be. We have: requested the UK for release of the nine million dollars equiva.- lent in sterling, and we have not had an answer back yet. In the case of marks, to bring the Board up to date on the German marks situation, there was about 143 million marks of the 18 percent which had been unused. Dr. Donner, you correct me if I sm wrong on this. i On my recent visit to Germany, I was told by the German i I I I government that they would immediately release 30 mi 111 on mark$ Which they had formerly not planned to release until a later  'l 11 STRICTLY CONFIDENTIAL 1'3~ date. That left .ll:3'- million German marks that had been un- released. We had talks with the German government about re- leasing all the remainder of the 18 percent, and we are waiting now for an answer to that request, but that doesn't make very much difference as far as this loan is concerned because the borrowers of the Bank have already placed orders in Germany far in excess of the total amount of the 18 percent. So if we got a release of all of the German 18 percent, we would have to allocate a certain amount to each loan. The total amount of the unreleased 18 percent in Germany I is about 30 million dollars, and orders have been placed for German equipment of over 90 million dollars. So we would have to allocate the 18 percent even if it was all released. So I can't answer to you whether this loan will be all in dollars or part in sterling or part in German marks or par in dollars. We just don't know until we find out. MR. OVERBY: Mr. Chairman, you just don't know whether you will have Deutschmarks :celeased for this particular loan, is that your-- MR. BLACK: Well, the Deutschmarks, as I say, if the re- quest is granted for the release of all the Deutschmarks, which we hope will happen, we still won't have enough Deutschmarks to go around. So we would have to allocate Deutschmarks to different loans. You see, we have used a good many Deutschmark:s already,  12 STRICTLY CONFIDENTIAL and the total amount unreleased now is what, Dr. Donner, 30 million dollars -- about? DR. DONNER: The total amount released? MR. BLACK: Unreleased. DR. DONNER: A hundred and thir~n. MR. BLACK: About 30 million dollars. As I say, we have got orders way in excess of that. So we just haven't got enough German marks, even if it is re- leased, you see. MR. OVERBY: I don't lalow. This is an old song with me, but it seems to me the time has long since passed when we ough· to have pretty free releases from some or our friends, and I don't quite understand why with the financial position as it exists in Germany and probably in a lot or other countries we couldn't have a pretty free release of moneys to meet the re- ! quirements of Bank loans. 11 Reserves are awful substantial now, and there have been statements about willingness to finance development in less developed countries, and I would think the place to begin is . on an obligation that has been outstanding for ten years -- well, perhaps Germany hasn't been in 12 yea.rs, but a longstand ing obligation, if I may put it that way, and I would like to ask Mr. Donner on Deutschma.rks whether he can give us any more precise hope that in fact a.a a. practical matter there will be Deutschmarks a~la.ble for this loan.  13 STRICTLY CONFIDENTIAL MR. BLACK: Well, I would like to say in behalf of Dr. Donner -- unusual for me to be taking up for someone that he has made heroic efforts to do this and has said that he has the backing of practically every one in his government to make this release. There is a budgetary problem that various suggestions have been made to get around. This is one of the main objects of my visit to Germany, and I am still quite hopeful. I thin Dr. Donner will agree. All I want to say is it is not Dr. Donner's fault. MR. OVERBY: I think all of us realize that there is a very fine and able budget minis tar in Germany who is an ex- tremely strong and forceful character, and we are allaJiare of that, but I am hopeful that Dr. Donner can give us an optimis ic forecast on the flexibility of Mr. Schaeffer. DR. DONNER: May I comment on three points. You expressed, Mr. Overby, appreciation of our finance minister. Mr. Black, too, was greatly impressed by him. As a matter of fact, he was impressed to such a degree that he told Mr. Schaeffer that if he wants he shouldn't be finance minister any more, such facilities as he has should not be un sed and might be put to useful purpose in the Bank. MR. BLACK: I offered him the job as Treasurer. DR. DONNER: Second, as to these 113 million, as Mr. Bla k  14 STRICTLY CONFIDENTIAL says, there are budgetary problems which the finance minister believes cannot be overcome at the present time. The thinking of the government with the finance minister has been that these 113 million be released over a period of five years, commencing 1958. However, as Mr. Black as already said, all the other ministers are of the opinion that Germany· is not only, as you have said, Mr. Overby, in a position in- ternally and externally to make these releases -- this release immediately, but they are in addition to that of the opinion I that Germany should do so because ot its membership obligationr. , The ma. t ter wi 11 be brought to the cabinet, and in the • ii r i ii Cabinet the other minis tere, particularly Minister ER:ard t, wi 1,b. 1 II try to overcome resistance on the part of the finance minis ter ~ 1 i ! 11 Mr. Black has talked to the Chancellor, Mr. Adenauer. I Mr. Adenauer has expressed sympathy, too. I So I can only mention that everything possible which can I I be done for the purpose of getting an early release of the re- ma1n1ng part of 113 Deutschmark has been done, all wh1ch at th present time remains for us to do is cross our hands and hope the best. I personally am hopeful that the actions under considers.- tion, the Cabinet meeting, will have the effect which we desir • MR. OVERBY: Well, let me say, Mr. Chairman, I have full sympathy with Dr. Donner's problems and with the problems of some of the other ministers. or course, as a Treasury officia ,  'I 15 STRICTLY CONFIDENTIAL I am sympathetic to the budget problems that every country has but I do hope that with the very substantial cash reserve that Mr. Schaeffer has been able to accumulate for other purposes that he might be induced to be a little more flexible and that we could get an early and favorable result. I think, in fact, the whole thing outht to be released I promptly. I don't personally see any real value or justifica- tion for not having the whole thing released freely. DR. DONNER: That is the idea underlying the forthcoming Cabinet meeting on these matters. MR. BLACK: This is true, as I said, that even if it is re leased, that would be used up fairly quickly, and we wi 11 then not have marks available to cover purchases in Germany. We have got no way to get any other marks because you haven't got a capital in Germany· that is low enough to justify our borrowing money. So, even if we get the re lease of 18 percent, we wi 11 use it pretty quickly. MR. OVERBY: I will only say, Mr. Chairman, I would feel more comfortable if we had all the Deutschme.rks released and had used them all and then had to confront that problem, rathe than the one we now confront. DR. DONNER: We fully agree with you. I said I would like to comment on three points. Now there is a further point raised by Mr. Overby, and I think I  16 STRICTLY CONFIDENTIAL should take the oppor'tuni ty to c la.rify that. Mr. Overby asked whether the Bank has approached the public, whether it is willing to release more Deutschma.rk for that purpose. Now we have considered it to be a great achievement that Mr. Eha.rdt has withdrawn any ties to the release of the German 18 percent Deutschma.rk. As you know, he has said that the Bank is completely free to use Deutschmark release as the J Bank sees fit for any project in any currency. I Now this is also the present policy and will be the futur~ :1 policy. As a matter of fact, I am of the opinion that the L~ 11 Bank should not even ask or pursue the project release line, 11 1· that instead it should establish, as far as we can, the policy i of unconditional releases. I I MR. WARREN: I agree entirely with what Mr. Donner has !I ! I just said, that the important thing is when these 18 percent I: release do come in from now on that they be usable by the Bank I on a fully convertible basis. I MR. OVERBY: That is important. I Mr. Chairman, just to show my impartiality, may I ask I whether the sterling is by any cl'Bnoe going to be made avai labl out of the~60 million, or whatever it was, set aside for pro- I jects? I VISCOUNT HARCOURT: Mr. Chairman, may I say something on ! I 18 percent? Ve frequently have these discussions. I gave up  17 STRICTLY CONFIDENTIAL talking a.bout them about a year ago. I used to answer each one of them, but I think perhaps at this moment I might say something a.bout sterling. As far as this loan is concerned, I would like to say that we have not yet been asked by the Bank whether we would release it. We had a tentative inquiry last night whether we would. We have not yet had an official request as to whether we will release sterling. Secondly, my government is considering at this moment whether it vi 11. Thirdly, as regards the general position of sterling 18 percent, unlike some directors who sit around this table, we I 1 .ii have not been able to resolve our balance of payment difficult es 111 I over the last few years. Our budgetary difficulties are sever , t , !Ii !I' !I but they are child's play compared vi th our balance of payment 1 1i ,11 !II difficulties, and I think: the world wi 11 probably realize that ,,,!I i but in the face of those difficulties I would like to just poi t out that we have released over half the sterling 18 percent up to date and, in fact, we are the largest releaser of 18 percen in dollars, in total sums, after the United States. Our total re lease -- I haven't got it all in my head, but I think our total releases are 44 million pounds or about 124 million dollars, which is the second largest total of 18 perce t released in the Bank.  18 STRICTLY CONFIDENTIAL MR. OVERBY: As the Directors know, it is a subject dear to my heart, a.nd th!se loans are a little easier to consider if we have greater flexibll.ity in the releases of 18 percent, and I simply like to support the Chairman's heroic efforts to make progress in this field. MR. BLACK: Mr. Lieftinck. MR. LIEFTINCK: Mr. Chairman, in this case we are dealin , with a borrower who, to use your own words, is in a comfort- able position. This is borne out by the information in the reports which show that for the whole development program of this company the financial requirements are 106.8 million dol lars, and inclusive in this proposed loan their available fun s will be 123.4 million dollars. So there will be an excess of about, roughly speaking, 50 million dollars. Now I have asked myself why should the Bank make this loan, such an important loan, of 20 million dollars under the e conditions, and the staff papers clarify this point by point- ing out that the company wants to cover contingencies. There are two kinds of contingencies mentioned, that the construction cost may be exceeded and that the earnings may fall short. As far as the construction costs are concerned, it appe s to me that there are certain inconsistencies in the report be cause it is mentioned that in the project estimates already  I 19 I STRICTLY CONFIDENTIAL the contingencies are covered. These are the construction cost contingencies. As far as the risk that the earnings may fall short of the estimates, it seems to me that the retention price and assurance the company has recently received pretty well covers this contingency. So, I wonder, Mr. Chairman, whether this company is so badly in need of this large amount of 20 million dollars and whether a smaller loan would not meet its requirements. There is another aspect of the problem. That is the need! of India for dollars. I understand that the government has su~­ ! ported the company's request in view of the probability that not all these dollars will be needed for this project and some of them might be utilized for other projects. In this connection, I would like to draw attention to the i fact, which is not new to you, that the Indian transportation I problem is very pressing and that India will need large amount$ of funds for improving its railroad and port system. I wonder whether or not by reducing this loan more money could be made availble for the transportation projects, and I I would like you or the staff to explain why you think it justi- 1 j fiable and necessary to make available this large amount under present circumstances to this particular~company. MR. BASCH: The point raised by Mr. Lieftinck is well tak n. If one goes through the balance sheet and forecasts of the  20 l I STRICTLY CONFIDENTIAL I company one reaches the conclusion the company is in very· com-I rortable financial position or will be. J I Of course, those are forecasts based on various assumptiops I as the report explains. I Just one assumption vhich I should like to mention is theJ I company vi 11 be able to raise new sharef. capital of 70 mi llion1 ~ .,c. I rupees. It appears now because or changes in ca.pi tal mar~ of 1 India the company vil l do we 11 if it raises next year one-halfi of this amount. We felt we shouldn't press the company to go into the market and to issue shares under circumstances which wouldn't be very good or favorable. Then Mr. Lieftinck mentioned contingencies, reasons for ' the item of contingency. In the recent negotiations, we disc ss- ed with the company the cost of the price of the various :1 orders and the escalator formula. I In some of the orders, escalator clauses exist. I they do not exist. Therefore, thecompany could not say exact I what would be the cost of the various equipment now ordered o to be ordered, and the company also asked "Couldn't ve raise the contingency to cover it?" We didn't feel we ought it very much -- slightly more than the previous one. I should like also to mention that we did not include interest during construct:kn and other charges in the loan. T y would be paid as we go. It is not in the amount of the loan.  'I 21 STRICTLY CONFIDENTIAL Finally, this forecast assumed everything will go smooth y in the company's works. We have experienced what happened in 1953 and 1 54. The company works could hardly operate because of various labor problems, and so forth. Nobody knows what will happen in the next year or two or the next three years. Nobody knows whether because of the ping crisis the company will be in a position to complete as i foreseen now or the project might not be delayed, which also i I: I will change substantially the character of the forecast. 1 1 With regard to transportation vhich Mr. Lieftinck mentio~d, the Bank is aware of the problem especially in the area where Ill there a.re the steel mills and the markets. ~ During the negotiation of the 1,1oan, we have obtained special representation from the Government of India, s~ng the government attaches high priority to this problem, and the 1 1 assured us everything vill be done~ transportation there 11 will be available as needed. 11 I Last month, as you know, we had extensive talks here I with the railway people from India, and during these talks we I have tried to explore the problem in this particular area.. We have got substantial amount of the information which makes us I feel the government railways know the problem and are doing ,, what is needed. I, In addition, the Bank intends to remain in close contact r with the railways, to be informed currently what is the progre s  II 22 STRICTLY CONFIDENTIAL of transportation improvements or expansion in th1s particular area. Mr. Lieftinck said that it is perhaps thought by the government that dollars for this loan might be used for some- thing else. Of course, this couldn't be done because the amo t which is for this loan would be disbursed only on the items, orders, for this particular project, not for anything else. Now with regard to railways, as you know, a team of con- sultants is going to India in January, February, to ieview the operations, management, financial position of the railways and afterwards the Bank would consider what could be done in the way of helping finance railway projects. MR. LIEFTINCK: Mr. Chairman, I am very grateful for this information. As a conservative banker, I would be very hesit t to supply a borrower with more funds than it properly needs. But knowing that you are also a very conservative, conservativ , perhaps even more conservative than I am, I am satisfied. MR. BLACK: We considered this very carefully. I think you have got a good point there. I would like to say as a conservative banker we would lik to ply a good customer with more money than another customer. This is a good customer. I think the reasons Mr. Basch gave as to the probable contingencies, the more likely contingencies under present situations, shipping, and so forth, justify to some extent a  23 STRICTLY CONFIDENTIAL larger amount, plus the overall balance of payment picture of India. So I think that the points you make -- we might make the sum less and the railroads more. Mr. Donner. 1i r DR. DONNER: I would like to refer to the President's ii Ir ii' if economic report on part of the economic situation. In paragraph 17, reference is made to India's external I balance of payments situation. At the end of this paragraph, I we are told that the government has been forced to take variou ~ emergency measures, including tae renewed .pept restrictions an also higher taxation. In a later paragraph, 19, we read that prices haven't risen any· more in October. In connection with this, it is said that the steadying of prices has been associated with the contraction of money supply. Since, in paragraph 17, among the measures taken into consideration by the government no reference is given to credit measures, I would like to ask whether this decline in the money supply is due to more rigid monetary policy or whether it is more or less an accidental result of other circumstance ? MR. BASCH: Taking, first, the last question, the re- duction of money supply as it appeared on the date mentioned here resulted from the reduction of foreign exchange not offs t  24 STRICTLY CONFIDENTIAL by the same amount of expansion to the money volume, due to government indirect borrowing from the Central Bank. So, I would put it this way: While the reduction in gn assets reduced the money volume by a certain amount, at the same time the Bank of India purchased less government bonds a , I that there is a margin of reduction of the money volume. 1 :1 11 DR. DONNER: Did the Central Ban~ purchase leas 1ntent1o~- i! !~ ally, or did it jue t happen? I I MR. BASCH: I wouldn't say it just happened, but we have I statements by the new minister of finance in the recent weeks j saying something must be done to reduce India's deficit finan I It can't go on like in the present year and, therefore, measures are being proposed which are being discussed right now in the Assembly of India. We haven't elaborated here on ~e proposals because we didn't want to discuss what is being mentioned or debated in the parliament of India. We don't know what the final outcom of it will be. There are various measures proposed. DR. DONNER: But then in reading paragraph 17, we could l rl have in mind that further policy measures are under considers ti on. 11 I MR. BASCH: There are. There are. And also, if I might 11 say, the government reduced commitments abroad and purchases, but all these measures will take a few months because at one I .I  25 STRICTLY CONFIDENTIAL day it was decided to reduce purchases and commitments abroad, but there a.re orders in the pipeline, and they a.re still comin~ I in. So the results of these measures will be seen in a few months. The same applies also to any import control, excise q duties introduced now, import duties, and so forth. 11 II DR. DONNER: Thank you very much. All I wanted to know I I is whether in addition to the other measures the India Govern ment also considers making use of the market of other countri s. MR. BASCH: They have been doing so. DR. DONNER: Yes. MR. BLACK: If there are no other questions, I would like to advise the Boa.rd that in this loan we have three banks participating: the First National City Bank of New York, $466,000; the Irving Trust Company of New York, $466,00 ; and the Philadelphia National Bank, $100,000, or a total of $1,032,000. These participations will be at a rate of 4-1/2 percent. So if there is no further discussion, I would like a motion to adopt the draft resolution as well as approve the participation by these banks in this loan. (Motion duly made, seconded and carried to adopt the draft resolution.) MR. BLACK: I declare the motion carried. The loan is approved.  26 STRICTLY CONFIDENTIAL Mr. Rao. MR. RAO: I am grateful, sir, to the Board for having accepted these proposals. This loan will go very far to sub- stantially -- I would say not very far, not adequately, con- 1 sidering the entire requirements of India, but a good measure I of first installment in the improvement in the total productii of iron and steel in the country. 1 I am very much impressed, and I would like to express my great appreciation of the trouble which the Bank's staff have taken in this matter. In fact, they seem to know more about these things than most of our own experts. I am indeed very happy to see that they are doing this, and it gives me great confidence that we will solve other problems of the country equally. Thank you, sir. MR. BLACK: Thank you.