Announcement of Twenty Million Dollars Loan for Steel Production in India on December 20, 1956

~.,/,o A,C,·~ 1 ooc:. ., IHIIUll·ihillll!mll • INTERNATIONAL BANK FOR REC0f'1STRUCTION AND DEVELOPMENT 1818 H STREET, N.W., WASHINGTON 25, D. C. TEL.EFHONE: EXECUTIVE 3-6360 PRESS RELEASE NO. 470 SUBJECT: $20 million loan for steel production in India. December 20, 1956 The World Bank has made a loan equivalent to $20 million in various C"Jj'.'rancia~ 20:a.~ ·::.!,o oAJ:'.,a.:r:i.sion of steel production in India. The loan was made to The Indian Iron and Steel Company, Ltd. (IISCO), a privately-owne~ Indian company whose steel works are situated at Burnpur in West Bengal. The loan w.ill help to finance additional rolling capacity so that IISCO will be able to increase its output of semi-finished and finished steel to 800,000 tons annually. IISCO is India's second largest steel producer and the output of ~ i t s plant accounts for about a third of India's present steel production. The First National City Bank of New York, Irving Trust Company and Philadelphia National Bank are participating in the loan, without the World Bank's guarantee, in the total amount of $1,032,000, representing the first maturity falling due in April 1960. The emphasis in India's Second Five<Year Plan is on the expansion of ,//, industry and transport, and the development of iron aL ':-steel production is _e the outstanding feature of the industrial program. India is in a particularly good position to produce steel. An abundance of conveniently located raw material -- iron ore, coal, manganese and limestone -- and a plentiful supply of labor, enable it to produce steel at costs as low as any in the world. The Bank has now lent a total equivalent to $126.5 million to increase • iron and steel production in India~ first, of $31.5 million, was made inJ)ecember 1952. This is the second loan to IISCO; The other steel loan, of $75 mil.lion, was made to The Tata Iron and Steel Company, Ltd. in June of the the  present year. The loans are assisting in expansion programs which will enable • the two private companies to produce 2,3 million tons of finished steel annually. ·rn addition the Government is building three plants wnich will have a total pro- duotion of 2.2 million tons annually. The combined output of the two companies and the government plants is the target for Indian steel production to be achieved by 1961 under the Second Five Year Plan. The first Bank loan to IISCO was made to help the company to increase its annual production of iron from about 640 1 000 tons to 1.4 million tons and its output of finished and semi-finished steel from about 350 1 000 to 700 1 000 tons. Apart from the expansion program, higher operating efficiency has already enabled the company to raise steel production appreciably; the program itself is proceeding satisfactorily. IISCO is now approaching a position where it will be able to expand the • production of semi-finished and finished steel products to 800,000 tons annuaJ..ly, and leave 280 1 000 tons of iron for foundry requirements. This expansion, however, will require additional rolling mill capacity. The loan annomiced today will help to finance additions to billet and structural mills and the construction of a new bar mill to increase rolling capacity at IISCO's Burnpur plant. Also included in the project is the addition of 20,000 kilowatts of elect~ic generating capacity. The new expansion will be carried out concurrently with the one now under way. The first, expansion program is scheduled for completion in November Ii 19S8 and the late~t one by December 1959. The total cost of the project now being undertaj{en is estimated at the equivalent of about $31 million. The Bank*s loan will cover most of the foreign exchange costs. The remaining costs will be met by IISCO from its own resources. It is expected that purchases under the loan will be made in • the United Kingdom, Germaey and the United States • 5% The loan announced today is for a term or 11 years including the 1% commission charged by the Bank. and bears interest of Amortization will  - 3 - • begin April 15, 1960. The loan is guaranteed by the Government of India arid will be secured by a first mortgage and charge upon IISCO's assets under a trust deed, with Baring Brothers & Co., Limited., of London, as trustees. (i II After having been approved by the Bank's Executive Directors the loan docwrients were signed t,n December 19, 1956 by His Excellency G.L. Mehta., Indian Ambassador in Washington, on behalf of the Government of India, by Sir Biren Mookerjee, on behalf of The Indian Iron and Steel Company, Ltd., and by Mr. Eugene R. Black, President, on behalf of the World Bank. i : f> \ \, •