Transcript of forty-ninth special meeting of Executive Directors, held on Wednesday, December 17, 1952 : India - Indian Iron and Steel Company and Steel Corporation of Bengal Project

STRICTLY !CONFIDENTIAL 89705 Ii ii 'I INTERNATIONAL BANK FOR 11 I I RECONSTRUCTION AND DEVELOPMENT i I' I 1! :I '1 FORTY-NINTH SPECIAL MEETING , Of i1 d EXECUTIVE DIRECTORS i: i! II 'I Board Room t II International Bank Building Washington, D. C. I Wednesday, December 17, 1952 11 !i The meeting was convened at 3:00 p.m., Mr. Eugene R. !I II Black, President, presiding. II II ! I I I 11 !'I 11 11 11 .I STRICTLY CONFIDENTIAL CONTENTS Agenda Item I Approval of Loan to Indian Iron & Steel Company Ltdo • • • • • 2 Report of Dr. Basch on Econoinic and Financial Situation • • • 2 Queries of Mr. Hoppenot on Loan: • • • • • • • • • • • • • • 14 (1) Contribution of Steel Factories and Mills to Equalization Fund (2) Shareholders Part in the Financing of an Improvement in Assets (3) Commitment Charge in Dollars although Loan Spent in other Currencies I I! * ~~ .. ~ * l I! II H q Ii I  2 STRICTLY CONFIDENTIAL P R O C E E D I N G S ----------- THE CHAIRftA.N: Before we begj_n the meeting, I would like to extend a welcome to our new Alternate Director from Yugo- slavia, Mr. Popovic. We-are very glad to have you on the i3oard. Mr. Popovic has already been in Washington as Alternate Director for tbe Fund. The main purpose of this special meeting is to consider the proposed loan of $31·5 million to the Indian Iron and Steel Company. You have a report and my recommendations with the supporting papers and the draft resolution. Before calling on Dr. Basch who will speak to you about this loan, the repre- sentatives are here from the legal and technical departments also, as well as Mr. Macurda of the First Boston Corporation who went out there on our mission to India. And they are pre pared to answer any other questions that may fall in that particular field. So I would first like to call on Dr. Bas ch. DR. BASCH: Mr. Chairman, I would like to start my com- ments just with brief remarks on the economic and financial situation of India which was reviewed in a brief paper called 11 He cent Economic and Financial Developments in India. 11 This paper refers to a paper of February in which we discuss a five-year plan and assess Indian development.It was not the I tntention this time to reassess from Washington the new positi~n but only to present so far as we know new trends or changes wh~ch STRICTLY CONFIDENTIAL took place in India since our last report. To summarize briefly, there are the following feat~res which perhaps might be considered. First, the inflation is a result of increased rate of interest, great control and also great de cit in the balance of pa;:rments. Due to a break in the price structure, which brought to light substantial quan- tities of hoarded commodities all over India, including grain, the price position has changed. The prices now are below the pre-Korea level. The food situation has changed substantially:-- ' so much so that most of the imported grain in 1952 went to gov~3rn- I' ]; ment stocks and decontrol was possible in various states in i i 11 i i 'i India. At present, the central government is considering whet~1er !1 Ii I i II further steps would be possible in the way of decontrolling 11 I !J grain. This change in the fo~ position also altered the import l program for 1953. It is intended now to j_mport not more than II 11 :~~l: ::1 ~: r~ w::::n t t ;:: f w:::p::::e:: ~e :: :::c:h is :::~:n: ~ 3 f India. " II The monsoon has been good in most parts of India. The II wheat harvest is reported as very good -- and the new harvest ~s I also expected to be good. I \H tb the disappearance of inf la ti on, the industrial pro- 1 ~ duction continues its upward trend rather remarkably, in spite • 1 I o r a ec 1. · in1.ng · prices. h 11 1: 1: II STRICTLY CONFIDENTIAL The position of public finance is not as favorable as ol- in the last year, mainly because /\a reduc on in income from export dut s, jute and other dut s. s 11 the governrnent balances at the end of November this year, which leaves four more months to go to the end of' the fiscal year, are not much below the opening balance on April 1, So we may assume that the final balances will not decline to any amount sjJn:Llar to that whicr. was estimated in the budget. The balance of payments in the year 1 51- 1 52, i showed a substantial deficit, mainly because of increa im- Ii 1: ports food grain, increas imports of cotton and other raw 1: 'I materials tn order to replenish India 1 s stocks of raw material !1 11 which were not accordingly replenished in 50. The trend s 11 11 I en reversed in July. Since that time we see once more in- I I creasing sterling balances. In the third quarter in 1 ' shows a surplus Of 0..,, .I July-September, Ind \1 million in its trade with the United tes. II Ii II All s cevelopment must take into account public ex- I penditure and the developme:it program which are estimated to 11 11 reach the pres fiscal r lLl bil on i~·u.pee s, a s·l:bstanf 11 11 tial strain on India 1 s treasury. I As things look to us at present, it can he taken for II granted that Indta will have enoi..:.gh funds to r:eet the internal i 11 and external req1Jirements for the second year of the Colombo 11 11 II Plan. Ii11 li ij I! STRICTLY CONFIDENTIAL Beyond that, our paper did not attempt to various reasons. don't know yet what will 8e the sc of the new five-year plan. The GoverrJnent India sent to Assembly two weeks ago a so-called fi.:ri..al draft of the five- r plan. we kn ow about it at this m is various information in American or nevspaperti out a detailed breakdmm or tailed information on how the rn:-nent expects to 17leet the 1 var::i. ous expend s. The re has been talk in India that an 1: Ii 11 Ii amount not surpass $560 million could be provided de- " 'I cit financing. in, we don 1 t ow what it means cause I! il in the past, s st year, there s been deficit ins II II in I ncJ ia , but ing in a non- tionary way. II I I we have to wait until we know tails. ·we only a I statement given to us by the r of Finance st year 11 saying if the is stepped and if we see a ,I danger of inflationary pressure, we would space it over a 11 longer period of t order to av new inflationa ,I s si.:;.re. So this program which rema here will have to i ex.anined anew when we know more about program • .I So much on economic situation. Now I shall tL:.rn i project which fore us. II The second pa deals J_n detail the technical 11 financial aspect of prograrn. The ject is suppos to 11 11 increase s~bstantial the production of and steel II li ia by financ expansion the Inc_ian Iron II II i STRICTLY CONFIDENTIAL Steel Company, which, beginning January 30, 1953, has to take over all the assets and the liabiliti.es of the Steel Corporat1on of Bengal. It was provided so by ordinance issued on October 29 this year, wh1ch, of' course, has /lapsed becal1se 42 days after- ll wards it /lapses, but we expect the Pa1~liament now in session will pass a bill similar to this ordinance. So the project will be carried out by this corpora ti on which has merged. with the other corporation. The objective is to increase production of steel by 350,000 tons, production of pig iron for foundrys by 260,000 tons. If we take into consideration the expansion program which is carried out by others, we fj_nd out that by 1957 India will have a steel production of 1.7 million tons, ·which is the1 estimated consl1mption in that year. Of course, in years afte~- 1 1 wards it will again fall short because consumption will expandl I and there will be need for further increased production of steel. Now, details of the project are described on pages 3, 4, 5 and 6 of the technical report. Also, the market is analyzed and there is no doubt that the increased production will fine_ market in India and the report reminds that should that not be the case, India,being one of the lowest producers of iron I and steel, should find export possibilities for its pig iron !1 li or for its steel. But at the moment, the danger' or such 11 I 1, apprehension does not exist.  II STRICTLY CONFIDENTIAL Then I turn to the stion of how project is eoing to be financed. On page 11 of the report you will find two items. One is total proje expansion cost estimated at $ .i+s million. Th:ts :Ls the project which the Bartle intends, if it is approved,, j to help to finance. In addition to that, there are other ex- : pans ion projec , plus additional working capital br::Lnging the total capital requirements c.uring that riod of construction to • 31 million. Now, if turn please to the page, pac;e , you how this new ital requirement is expected to met i the Bank loan, $ .5 million; addi onal loan of the Govermnen~ of India, $11. million; advances from the Equalization Fund, $21 million; domestic banlc borrowing for a short period, sale lk.o.L.;.,., of shares of rtsco, $4 .6 million -- l~ a total $75 .45 , I' ~ trw:/-of i million, whtch, comparing with page 11, leave-s an amount of I > $90 million, and ~t~·~ s ;;~ will be provided by a way of ~ , ~ ~e1rl r financing from ea five years. s of the corpora ti on during the pe od o~ On page 12 are mentioned our loan -- to which I 11 come later - - a normal loan of the Government of the advances from the Equalization Fund. An add1tional loan, here put at $11.,34 million, is a regular loan to ch l l'I interest during construction will be and which is OS d i ii II 1: i'I STRICTLY CONFIDENTIAL to bear interest equal to interest on our loan and to be amor- tized during the same pe od as the Bank loan ~:le~ will be " amortized. In addition, there are those advances from the Equaliza on Fund 100 . 11 ion '"?l mi rupees, Y- __ on. ·111 This advance r.cas no maturity date and doesn 1 t bear any interest during the period of construction. la r on, any pa~rment of interest or any pay:rient of amort::!_za ti on could be made only if the company ob- ' 1 ta ins a so-called spectal element in addition to its normal i1: . re t en t ion ~ 1!'3:'.ae . ~ th e company :i_e& or J_i governmen t· agree t o l li I! convert part of this advance into stock capital of the companyl. i So this is a question of financing. II 1! I n ;I If you p se turn to page 14, there see the estimate~ ii " ii capital structure of the company. 'de give here four years 1 ii the beginning or the end of 1 ~2, 1 57, after construction, 1 , 1 61, after the debenture s been repaid, and 1 67, after the 11 loan and the normal government loan 'have been repaid. If you 11 11 look down to general reserves and proportton of' capital stock, I II ·1 you will find that in '57 reserve and capi 1 stock will II ~epresent only 25 percent of the total capitalization, but in I I I 1967, 71~ percent of total capi taliza ti on. Surplus and general I I. reserve by that time are expected to increase to 201+ million Ii Ii rupees. 11 1J Ii tables which are attached to the technical report 11 !j jnform de ta on debt flow during this period. le 2 I' 1! Ii,1 II 11 STRICTLY CONFIDENTIAL indicates source of f1_ nds and 1 cation. And in,, the last line on appl ion of funds on Schedule 2 has an item nF:ree Cash at the of the Periodll ch shows m lion rupees after the re :yment of loans. ~Jo the projection of estimated earnings, as that eve will turn out all right, will indicate the end of period the company woult_ be iµ a very comfortable fj_nancial position. Now,, with recard to the loan ac;reement and gi.:arantee agreement,, I ld like to mention only a few i Other items are in detail elsewhere. If you se turn to 1 of the loan ement, there: a:t'e mentioned circumstances preceding the Amalgama- tion of the two companies, rantee of the rnment, secu 1-rhich the is goj_ng to obta , and special agreePJ.ent with the Gove rP. .r1en t India pr the neces fj_nancial assistance. I i Eere I like to on in addition to the ar'.1ount j i! I i wh:lch has been mentioned in the report here, Goverrnen t of! I ' India also the acre ' a r sone disc1Jsslon Ii'i II l}.S, t hat it :Ls ready to to the company a tt.a. t I I r .I tbe compan:r may reasonably re to finance to complete I II 11 the expansio:::i program. In e..cld ion, so lone as part of I I the loan d1,ie to tb.e Government of India and also the Horlc Ii BariJ~ st.all remain outstandinc;, to advance the c ompa2:i:y I ;i..i.~t~li'li-!-1~181iiilol8~Jlll:ill"r8 JC i1 11 at reasonable rrr.s such other su:ms as the c may I Ii 11 I .I STRICTLY CONFIDENTIAL reasonably by way of working capital to mainta :Lt self' in a sound opera ting condltion j_f the cor,-ipany shou not be able to raise s"L:ch capital or su cap 1 1.J.pon ir terms from the te so1.1rces and. the company 11 so request. Terr:1s of loans are ica.ted the 2oan a::;re te of interest, !! • the l::::>an itself of inte~est durinc per'iod of construction, cav.se '!twas lt c period conpany will not have casb to pay couJL do tt :Lf :it woulc'l be le to borrow for that pl:rpose. So the ~er:t of cons ti on :I. s j_nc1uc1 ~.n total ai71ount of tl:e }.cx:i..n. It ltas also ou3t1t as ent to allow, after C01Jp t ~ ! on of e project, the company ~ J82.l".Sto ac te e "'r'1·ind:" '--'- l ~-.o.'f0 v ... I iza t1 on on m;r J. ·:)E1D S s. LI (, I s :Jn ,'\pr 1.:; •·J, , ar1cl on Oct 15, I I. ere :~s a1so one 5.tOF'. loan whj_ct :·p~-~1.,, .J ,,lt.J._, _!.. 11 ! Il if> the co~; clee es to accelera r·epa on it::; Gove rn'ne4t II I ; Ind loan, j_ t shoc..1ld acceler'a te also at Ii 'i r:ent on m:r l -~ 1 ~ ;Dl~a"e :· - ,,, . u:;; , _1001.r ·" •• at Art:l.c 7 dea w:L II II te, on page lr(, and 1llJ_J there il '~ev·t'~ I! -L q have to 1J.ec1 .,c.... .Lore +" une can ct:Lve. The i~nr:.'1ent acreesent p for le i1, 11 H II I'  1 l STRICTLY CONFIDENTIAL tave been duly e:::ec1J.ted 12.ncl effect:tve; the ar:1alcamaticm e1n- fective by an act of Parli12.ment to be enacted; securittes to be provided; and tt.e borrower shall have furnished to tte Eanlc a certif'j_cate as to its r:i_nancial condition. ~Ie :;ot one anr5 ve ·want tl'er~ to get anotter• one. No~-r, tr.e last part i.s the gue..rantee a:~reement, on vhich I shall be ver·y lJr::i_er. It i3 in 1'stt.er normal forr.i. It Pl'O- vides a guc:,rantee of pa;:nnent of principal, interest and ott.e:r' 11 cl:arces and under the iJhereas 1: the second 11 Hhereas 11 it mentio::is tLe ~3anlc has a creed to make a loan 1)~t only on c ondi ti en tl:a t tr.e asreement witl~ the Governrf'ent of I:tJ.dia :1-s dul~1 complete, wh i cl-:1 r:eans the 2;overnr.1.ent ac;reement to provide add:Lt::i_onal This woulc' be the fourtt loan to India. The Banl.:: has 1 tLree loans so far amountinc to ab01.1t ;?5U million. 1 of amortization, by the end of 1952 tte outstancl:Lns s:n:.oi..::.nt, -- L .... -·1.n(_;_,· .'l.SS'lnl.· __ , 8VA_.r-.rt·1--,in.:~, .... , uL_ ~ •,.dll L- ~'""'.,8 .. nic-.1-'"rSeOl ···-'-'~V J 1 ·']•11 "·--- 'oe , .,.,...O''nO' Cid. L· ' c':r;:-:i • 1J_,_,· ' ~illion. And before arnortizat!on on this particular loan woi..::li oesln, the outstarnI:Lnc ar10:mt on the remain:i.. n2: ttree loans rn5. 111on. That j_s al1. TEE CE!''l.I:2I~i'i.N: Before I ask for an:t qt.1estions, I 1;ndersta c1 there has been sorne dj_scl.'ssion ab011t tl~e transaction concerninj tte First lfortce..se bone. holders. As you l:nmr, the deal was ircaue wb.ere the F'j_rst r:ortu1c;e bond holders in reti...~rn for o"L1r ~ havl.nc e., pa::. :L pe.,ssu 0 position~ the first rnort2,age accepted an X. STRICTLY CONFIDENTIAL i::J.crease percent on their bonds to lJ .75 percent on tl:e i r -cJ 011c~ s. Now, the reason th~t is this -- that First ..r:i.p bond h rs first of all wanted ir b to ·oe O .L ..:.. Ifow, the!r s were sellJ.nt: at abGut cents on tLe dollar, these 1~ percent bonds. And ~ ·- u ,_ J. ·- ,~ s c·u ..., t 0··:10 10-;· ··-'-"- J ·1· ·-- ~le tcent in c orate finance with a large, new 1:10rt3a.~e 11 ·1 o~ new debt being put on a company, as thi.s is bein;; done her1' 11 !I qt:' i te freq 1J.ent tf1e sma amount of l~rin,s wouJc1 be I I I I t:.ireo would set u9 a new, clean-cut first rnorL .1 I \Te felt, ho1,rever, that,in view the semi-2;overrrnental I 11 charac r of s inst ion, \f8 sf'~ OU ld Il Ot r:: 0 11 I Ii we should not allow these bonc.s to paid ln when I I the bonc.s were sel at -So cents on do in the marl::e~. In other words, the ho ers in that case would have cotten 11 !~ out 101. 5, whj_ch wm.:ld the call price to pa'.- tL ose bonds I I i I! full. have trj.ecl ever·y·where we cou - - and I don' t 11 I pa~Sl.' 11 '1 II there r.as been any ex:ceptj_on. >Te want to [;et a parl 1 Ii I j posi on with other holders debt the c s that we I finance. So that we fe that :Lt would ir, order to I !1 this par1 pass11 position, to r three-qua1"ters of one II 11 percent or sar:i.e rate of t our would bear JI ,I II to cet holders to accept a parj passu position. II i In other words, we were faced three pODSl.Ol • ""I • ties. Ii11 11 I! 11 STRICTLY CONFIDENTIAL One, paying these bonds off in full at the call price, which wo1Jld si ve tLe holders a bout 22 points profit over what the bonds were selling at. Secondly, leave the bonds l:U::e they >·rere and have a first mortga&~e ahead of our debt. O:t• thi::'d, mal:e a trarJe with them whe:r•e we would get a pari passt1 positio:1. And we felt that of the three this was to our best interest, to do this in this case as well as the precedent involved in fl1ture transactions where we 1·rould want a pari passu position ii \·Ti th first rnort;:;age bonds 11 Now, as you know, the old bonds, the 4 percent bonds, iII 11 matured in 1966,and also as part of the trade we agreed to 11 Ii accelernte the maturity of those bonds to 1961, so that the 11 I',I holders of the old bonds would be civen a new bond bearincs Ii q 'I 1. l~. 75 percent and will ma tu re and be paid off by 1961. Ancl 1 of course at that time there will be no bonds OlJtstandjnc· exce. t ! ours as far as the first mortr;ase is concerned. - - ---v 1 11 The first proposal that we made was that we merely give I the holders a 21.75 percent bond or increase the interest rate ! to 4.75 from 4 percent and leave the matl1rity as it was. It I I I looked as if tAa:t j_;: holders of those bonds were suddenly c;ivel JJC. I a new bond bearing lJ.• 75 percent as compared to the old bond I 11 i bearing 4 percent, that the bonds would be worth more money. I I I However, the market interpretation was such that when tm t was I announced, the bonds went down in price. It was because it 1raJ I 1 a sood deal larc;er debt and they did.n' t have the position that I I 11 STRICTLY CONFIDENTIAL they had formerlyj so the market interpretation was that this was not a good d f'or> the:r:ri. So that was the reason we finally agreed on an accelera t:i.on of the rr.a turi ty from to 1. Nmr J are there any quest:i.ons Dr. sch? MR. SVEI.NBJ¢'RT,~SSON: 1·1r. 1 rrr.an, I tr-4,nk very much ,c. for the explanation. I have been asking ques ons about it ca1Jse I really could not ur.dersta.nd j_t from what is 1n - , and I oaner ~ in.le it 11 be very usef1J.l that we r.:.ave the explanation. I thank you ve m1JCho THE CHAIRM.-'\N: my other ques ans? l'IIR. HOPPENOT: Hr. Chairman, I th:Lnk ·we can all very happy because of this loan to India. India is an extremel;:r large underdeveloped countryj my ling is that the Board and the is only cio its duty to one its most important members in this interest ln its develop:Ment. t when we d:Ls cussed that question r:'.ay be a .i I iJ year a , was extreme :Lmpressed by the fact that was told I' i us 11 t even with the best development efforts India wo1_;Jd I! II ep, due to its reas population, :Lts general state Ii 11 Jlwe So I may say that I welcome this loan and that it j_s ,, :i Ila development loan, and that I strongly hope tl"iat the 3anlr 1-ri 11 -·- 1 i vote tl>.e same way. I !I t as the loan itself, I think that papers and ii II explanations by • Baser~ sb.ow a m:rr:ber of pect:liar I i 11 1! 11 1! I! STRICTLY CONFIDENTIAL st ions ich are in fact due to the fact t in tba t case :Lng to a corporation ch has exist1ng be re with all the old lia li ties, all their old technical, f:Lnan- cial and 1 problems, and also the ct that it is a producit I national interest, and the Indian Government naturally wantf I " to have a part j_n the development of such a cor:n:1 i ty. ! In thj.s rather complicated pattern, whj_ch is due to cir- cumstances, there are only two things I do not say I reg:ret but I 1rnuld to the Boa 's attention to. I do not criticize. The contri ic1 of the steeJ. factories ancS steel mj_J_ so-called equalization is an extreme laT'[;e one • It :'Ls some j_ns more than 100 ri:pees a ton ror a ton of steel :Leh~ as 1Jf!:: see in the p~per, is sold at or retention price (Jf 160 rupees. It 1s a ve large amoum.t .. to be pl1t on top the retention ice. And after all, ·'. f' that 100 rupees a ton been with the steel mill, the sales price to the c 1rou.ld have been the same and t 60 rcent of the cost of improvement been met. 3ut that is st a problem• There is another thing that I '»rnuld like to say and tba t is :tn that whole financial ttern, I slicht regret that way has not been found for the reholders to tal;:e their part 1 ' in fj_nanc of an iY"lprovem.ent in assets of' which, after a rather short t , the t irne of clebt and so on, the::,:- wt  !I STRICTLY CONFIDENTIAL be the owners. Is it due to the fact tba t the prof':i_ a:"e c1Irta1-led. to so 1n11ch a tori 1vhlcI:. lessens to a certain e:;~tent t;l18 size of ri capital to invest? There 1s) nevertheless) sol'.:1.e slj_ght imbalance. The :Oan~: is contr•ib11t the i?.a t ion Fund is contriot'tinc;, the IncUan State is contrib-cting by loan, bi:_t the shareholders a1~e sit sttll. There :ts somethint:; not quite -- liell, one 1-rrn.:ld prefer~ i.t otherwise. I would a .from Basch if the Ind 5_an ~2ta te at the end' the construction pe od wants to transforn th3_s eq11al:izati i;I l advance 1 into sbares provision been made how it will 11 form amounts or so on and. so forth? 1[ , as a very last rema" k, I would. 0 t, 11!1 rtr.an, to you trJ1t by the fact t the cormitr:-~ent criart:;e I i !las been inc tlle amm;nt loonee, tllo s Da t;; of c:'"h'~-~-t- \l >:1ent charges and othe1.., cha s seem.s still :'"!!ore ev:~den t u = 1! ·I ! • loan as :tt was before. ! 1 1 I l I take 5_t that this loan nay spent :Ln other cvrrencies 1,' 1 1 I I! I i 6 ollars. The cammitment elm dollars. I rJ: j 11 that some way co1;ld 01md to apportion the cor.:.t1itment 1l2ore eo:actly to foe cur·~nnc s dislmrserL T on't want to 11 ili D.0<1 ,_, a I "" w ,_ v that r'latte1"". t j_f II ~~p lla"'l. ,, y01_: to let me d cuss t:'.:1.a t questi. on and a new idea . on I .... ,~ v~·a +. GI !I l1quest:ton with the staff and, el so, j_ t to i\ 11 l Policy to tl:e I\ Thanl:: ~' or , 11 I' 11 II 'j! ·I STRICTLY CONFIDENTIAL 11, on t rme point, I s ted rpose of ;~-:eet::.ns was to c::ms er rr·o:o 11:1.on .. I slJ. have -- or the equivalent don 1 t ~.co U,.l r5. ollars 8 0 i l we E.:et DH. If I n~g,y :.. ti ons r c,rh :5.ch vali;:io. t:Lor1 . . ,.r2..1:ce o , :tt sta e, Pl"Oposal to convert the whole the r.:td vance comnon stocks, the company to agree. s to agree to c:my proposal c from goverrnent to pay pa of the advance in corrrr10n ~1tocks. This questton s been discussed our negot tions several times anc' we obtained clear 1..JJ.c1e:c's tand ' o,lso t>e papers of acre an a ~"\­ ~: • to ZEl, ti on c.r:L obtc. rease ce. r s el sta;:t ce teel. J_l 5_ CY: .s- -; ! ..'..' I e _,_,..,., ,..,. ~ ('"' ,·.• ~ J...) l j_ }.l :~. ees.  ·1' '! STRICTLY CONFIDENTIAL en steeJ. . ert to e s .. J_ :i.nc ~ease on o~ s el i~ _ (~_ s ll~)t ei1 t~. e c5 :L pa. Ir1cJ. "':Jee11 l~. enou · to attract tl1e CtlfJit~al t steel ro2..leCt It one of -.. ~rider CDni~l"OI.• would. oet r to :Lt \10-U oe one, t11e c :::ed recei 2.n on. It n: that c1i S CllS Si 0:1 17 tr:e cons r~: ;Jc es nope en e::c:Lse cJ. ty. 1t need t 'J ca11 C 01J S iLl})l ~7" ose an 9}.  l' STRICTLY CONFIDENTIAL :'_n eecls fol" ior: steel. I t c:o r to ::iave time to have a va.i b tLe e::;cpans :L 0::'.1 d. SO!l'!e to point 0 ::" sch tt.e position quite clearly. 3ut I ac;_d the ose of iza tic:-:, J as ne.,n:. e u Dp is 2erely to equalize J are lc)W J and steel 5.np fr or: ose of une .L' eqL1a J_ 5.!3n- t :Lon :-eeal e::tent:Lon s ose sect j_s ice e. n :LrLCJ>easecI se. p Basch one c.o 1 that wo· e:x.c e '.i1+~r C.r l .... Vt.,', the ec on::inic: ial rest~l t c:::s. c e sa::i.e. cont steel corc:par:.:Le G en.a eV8l' ~-rant, several resi.:lts llmr J t s el, be in sbort supplyJ the pr e "·~' oes to tl~.e ce and t•.pset~; O'L~-r ec are on lo-r:r s el l on a ce::::•ta in e t d trect \1a;7 Of P:eet I I I rr~tD.ir1, I ar1 c1 =L te wit'!:1 th~ ti on elven. °}")"";r ,_. ,j c(, •r c ollee., ,j e I I p 0111 t I to nm:r is that T th~t I \-rant~ s J~ ;-:: e :'.n STRICTLY:1 CONFIDENTIAL i i the Indian Goverri::wnt or 1i ~.teel pe le Sl'J !1 :1 acti..:al sales }J ce to t11e pt:b e. point II !1 al1, re be a J.ai'"' tetween the :r•etenticn price !J the sales p:r·:i ce, one' could Jwa :Lns toad of clo the I l~arder, compl5_ca tee"; v:Lew, to c;:Lve to the 1zation a fror1 tbe equalizat:Lon 1 f an advance, I op:::: ~i -1 :l company :in the I't:i. 0 cause ii zat1on to a larc;e dev otec1. to deve1 leave to the steel r:;ill to t'~;e fo1~ develo;Ji::ent ~ gover·n.:~1en t control. That is all. t I am happy about ·what is l:a pp en in,:;. I have to e::ewpt. Other they 1ro1' ld to in.crease twice the p co of steel to ':',-'ilJ ,l,.·.;..l 'l• NEHRU: there is, also, wore than one cor1.pany. other questions? \Te , t:t->ere are ons, may I have a r:iotion to appr•ove the reso- lutton. I so I ;<. • 3econd the Eiotion • 1 tbose favor ( Chor•us of nayes. n) Opposed. response) Tb.e JT_otj_on is f\.pproval loan llion or the equivalent other currencies STRICTLY CONFIDENTIAL Iron and Steel Conpan:r s en ssed. Th::Ls loan has been ve con:plica tee~ J as see, and the nec;ot:ta tions have en very :tnvolved. I w lJke to ress apQrec tion to the sta members i-rho have worl:ed on is pro- ject_, rticula:l'ly Dr. s a.nc: o Ri :rCls and Iiir. Cla1~~;: 11 of the Lesal Department, and F'lesher of the Te cal I Department, and also to very sreat assistance tbe, t was I. I given us o;;r Mr. George \Ioods, the Chairman of the rst Boston I Corporation_, and Macu1 da of the same c or!Jora ti on. 1 l:lR. TT.BS I'1r. Chairman, it s been so that I was calJed upon to mal~e a speech of thj_s (laughter) I .I arr. not qui sl11.,e 1v11a t the procecl11re is o I not:Lce that •I w::i.th y01!r us1lal kindness and :ro1Jr L1s1Ja1 forethout,:ht, yo'.J. have taken s s see tbat in future I will be called on to s·9eaI:: more often. o Cbairman, I only wish to convey tbe thanl::s of this loan; to :rou, sir, and the r'lana ent for b.av p:"'oposod loan; and I sh po..rticv.la:r to associate myse ,and I Indian ner:ot:La tors who came here i'or t:his loan, and asked 11 me s c cally to do this, w:tth tl:.e tr5_bute have ic"! to II the staff the Bank, and particular•ly sci:1 vho lee:. the 11 I team ne tiators on the 1 s side. The otiations have been ve compl:Lca ted. I am not I .I II 11  I STRICTLYII CONFIDENTIAL Ii '"'u"Vle t1·ia t I e"Vls1·nocl a these papers corr•ec e tl1a~.t~: 0 I I :ut I :rust . . '• tex•ests have sa rdec3.• I I I ( ) whether they ve or they have not, o-cr people I 11 felt that the sympa tic understand vi whi eve point I 1 1 they r3.i was considered was t as r.!11Ch as the:'· would l~ave sired. I I I should also l:Uce to add tribute to Dr. George Wo s ancl 1'Iacurda whose 111-;_t efforts thi.s :-1atter have i I I brought about th loan, and lt is hoped efforts i I not end there• We , spi of your ins out 11 that is a so speech. II I overlool:ed one thj_ng. Director for ed 1 Kiro~~don, • Chrl stelow, a srr.a opera t:5.on. He asked I to 1 be 3-"'ecord in favor> of thjs loan. I , The formal clos the loe.n 11 four 0 1 c10 j1 afternoon I 11 ask you, as usual, to p is conf j_d ent-i al II I until that tine.