Announcement of Sixty-Eight Million Dollar Credit for Indian Railways on June 29, 1966

,. . 'l • INTERNATIONAL DEVELOPMENT ASSOCIATION 1818 H STREET, N.W., WASHINGTON 25, 0. C. TELEPHONE: EXECUTIVE 3-6360 IDA Press Release No. 66/11 Subject: $68 million credit June 29, 1966 for Indian Railways The International Development Association (IDA)~ an affiliate of the World Bank, has approved a credit equivalent to $68 million to India to assist the development program of the Indian Railways. The credit will cover more than half the foreign exchange required for the Railways' investment during the 13 months ending December 31, 1966. Including the credit announced today, the World Bank and IDA will have lent a combined total of $575.3 million for the Indian Railways since 1949, the largest • amount by far they have lent for any single program. During the 13-month pericd the Railways' are investing the equivalent of $690 million, of which $116 million will be foreign exchange. Virtually all the invest- ments in this period are for the completion of works started during the third Five- Year Plan which ended March 31, 1966~ The IDA credit will be used for the pur- chase of components and materials for the construction in India of about 250 steam locomotives, 80 electric locomotives, 33 two-coach units of diesel rail cars, 900 passenger coaches, and approximately 10,500 freight cars. The crecit will also finance overhead equipment for electrification, and other electrical stores, plant and machinery, track material and various othe1c equipment and materials. An important development in India has been the growth of industries producing railway equipment. Manufacturing capacity for rails, wagons and track material i.s • adequate not only to meet internal requiremer).ts but also to provide small but grow- ing amounts for export.  - 2 - • • The cont~nuing development program of the Indian Railways is intended to expand capacity and to replace locomotives, rolling stock and other equipment and facilities which are becc:iming obsolete. Between 1955 and 1965 freight traffic increased from 116 to 206 million tons, or about 6% annually. During the same period, pas3enger traffic increased by about 4-1/2% a year. The expansion under- taken during the Third Plan period enabled the Railways to handle with ease the increased volume of recent years and, except for temporary local shortages, to cope with seasonal fluctuations. In the last five years the share of electric and diesel electric traction in goods movements increased from 10% to 43%. New automatic coupling and braking systems are now being tested and th£ir adoption will permit substantial increases in the weight of trains carrying bulk commodities. The Railways expect freight traffic to reach about 290 million tons by 1970/71. This forecast depends on the growth in production and movement of steel, coal, iron ore, cement, petroleum and food grains. Passenger traffic is expected ~ to increase by 4% annually during the five-year period. In India consequences of an underestimate of future traffic and investment requirements can be serious be- cause a shortage of capacity interferes with industrial development. The Railways therefore make an allowance both for monthly fluctuations : ,, traffic and for un- expected increases. With these allowances, a capacity of about 320 million tons will be needed for the projected 1970/71 traffic. If traffic is less than ex- pected? the Railways will reduce its planned investment in later years and ac- celerate the retirement of some of its over-age rolling stock. Because of the heavy expenditures being made in the transport sector, effec- tive transport coordination is highly important to India. The Government set up a high level advisory co1T111ittee on tr~nsport policy and coordination, and its report was published in February 1966. Consideration is now being given to mea- sures to assure appr.opriate policies and coordination in future investment plans. • f - 3 - • The IDA credit will be for a tenn of 50 years. Repayment of principal will begin August 15, 1976, after a 10-year period of grace. Thereafter, 1% of the principal will be repayable annually for 10 years and 3% will be repayable annually for the final 30 years. The credit is free of interest, but a service char.ge of 3/4 of 1% per annum on the amount withdrawn and outstanding will be made to meet IDA's administrative costs . • •