Announcement of Development Credit Equivalent to Sixty Seven Million Five Hundred Thousand Dollars Granted to Indian Railways on March 22, 1963

• INTERNATIONAL DEVELOPMENT ASSOCIATION 1818 H STREET, NW, WASHINGTON 25. D. C. TELEPHONE. EXECUTJVE3-6360 IDA Press Release No. 63/3 Subject: $67.5 million credit March 22, 1963 for Indian Railways The International Development Association (IDA), an affiliate of the world Bank, today made available to India. a development credit equivalent to $67.5 mil- lion. The credit will help the Indian Railways to finance imports of materials and equipment needed during 1963 for the Railways' development program. India's railway system, one of the world's largest, is the country's nx:,st important carrier of long-distance freight and passenger traffic, AB such, its continuing expansion and modernization is central to India's development plans. • Under both the Second Five-Year Plan (which ran from 1956 to 1961) and the cur- rent Third Plan {1961-1966), the Railways are accounting for a.bout one-fifth of all investment in the public sector. This investment, combined with profitable and efficient working of the system, permitted an increase of nearly 50~ in freight traffic a.nd of 25% in passenger traffic during the Second Plan period. The Railways last year carried 158 million tons of freight and 1.7 billion passengers, and it is expected that by 1966 freight traffic will reach 250 mil- lion tons, and that passenger traffic will be 15% higher than it was in 1961. Particularly sharp increases are expected in traffic in such vital. bulk comroodi- ties as coal, iron ore, steel and cement. In the case of coal, the magnitude of the transport problem is such that a. special study is being widertaken as a matter of urgency under the joint auspices of the Government of India and the world Bank. The coat in foreign exchange of the Railways' development program has been • substantial. Considerable help in meeting it has been provided by the ~rld Bank, which through six loans over the past thirteen a.nd a hia.J.f years has provided the Indian Ra.ilw-ay~ with nearly $378 million -- by fazo the largest azoount it has lent  - 2 - for any- single enterprise. BY developing the .manufacture of railway equipment 1n India, dependence on imports has been greatly reduced; electric locomotives, tor • instance, a.re now built at the Chitteranjan works of the Indian Railways, and by 1966 it ii, hoped that nx>st of such locomotives needed by India Will be provided by domestic production. Nevertheless, the foreign exchange cost of the 1961-66 pro- gram is expected to reach the equivalent of Rs. 2,490 million ($523 million). The present IDA credit will help to cover the cost of imports for the railways over the coming year, when expenditure abroad is expected to reach its peak., It will be used for the purchase of components and materials ne~ded to build locoDX>- tives and rolling stock in India, and also to finance imports needed for the elec- trification program, for track, and for other materials and equipment. Orders for imported equipment a.re placed on the basis of international competitive bidding. The 1961-66 program of the Railways places emphasis upon equipping the existing system to carry heavier trains at higher speeds. .An increasing proportion of the traffic Will be hauled by diesel or elect~ic locomotives; some l,6oo route-miles of track a.re being electrified; about 8o, 000 new freight ca.rs, many of increased capa- • city, are being acquired, and heavier track is being la.id over much of the system. In add:f.tion, workshops, bridges, yards and signalling works a.re being improved. The program is already well advanced. The Indian Railways are owned by the Central Government, and are managed by a statutory Railway Boa.rd, which is responsible to the Minister of Railways. The Rail- ways are run on commercial lines, and have consistently operated profitably and efficiently. The IDA credit of $67.5 million is for a term of 50 yea.rs, with repayment of the principal beginning on May 1, 1973. Thereafter, 1~ of the principal will be re- payable annually for 10 years, and 3i will be repayable annually for the final 30 years. The credit is free of interest, but a service charge of 3/4 of 11, per annum • on the ar:ooi.mt withdrawn and outstanding will be ma.de to meet IDA'a administrative costs,