Announcement of Seventy Five Million Dollars for Tata Steel Expansion in India on June 26, 1956

WORLD BANK \~~ (/ '"'\ 1818 H STREET, N.W., WASHINGTON 25 1 D. C. TELEPHONE: EXECUTIVE 3-o36Q . 'i1 ·-------------------------.-------..J. . . 1 ----------- C PRESS RELEASE~NO. \_..,.-;, 449 SUBJECT: $75 million for Tata steel expansion iri. India. June 26, 1956 "The World Bank. today made a loan of $75 million in various currencies to The Tata Iron and Steel Company, Limited, of India, to assist in the fi11fl...ncing of a large-scale expansion program to raise the Company's annual output to 1,500,000 long tons of ff~ished steel ( 2 million long tons of ingot steel) • Tl:~is is the largest. loan the Bank has yet made for iqdustry,' and also the largest the Battk has made in Asia. \\ ·s:The Fi:rst National City Bank of New York, the Irving Trust Company anq:, the Manu- facturers Trust Company are partici.:pating in the lqan to the total of $2,355,000, being " th~ first mat:t1rity, due 'in December 1959. · The Tata exp:;msion scheme is. incluq.ed in the mve··stment proposed for the ;private sector in the Indian Second Five-Year Plan. The Plan envisages an increase in domestic , rroduc·t;ion of finished steel from the present level· of lt million tons to a.bout ~ million tons a year. This is to be achieved by expanding the two existing privatel.y-owned plants and by establishing three new government-owned plants It is estimated that demand for a steel in India, which already necessitates heavy imports, will increase with the economic expansion of . the country and the growing requirements for steel products for railways, • industry, poweir, irrigatio:i and other constructj.on. The supplies made available by· the proposed expansion of steel capacity, including that of the Tata Company, should be absorbed by the internal market. The Tata Iron and Steel Company, Limited, is one of the largest integrated plants in Asia and has a long record ot sound management and profitable operations • Its plant is situated at Jamshedpur, 150 miles west of Calcutta. Nearby are ample sources of good quality iron ore and coking coal; the electric power needed for greater production will be supplied by the Damodar Valley Corporation, to which the Bank has made two loans, tetaling $~7.2 million, to assist the financing of power plants a.nd dam construction. The Tata Company's proximity to raw materials and power supplies enables it to produce steel at a cost as low as any in the world. Capacity of the Tata steel mills has been '800,000 tons of finished;,-,?ateel a yea:r since before the war. During the war period the plant was subjected to heavy and con- tinuous use without adequate renewals and replacements. Some parts of the existing facilities are already in process of modernization and expansion under a first postwar program which began in 1951. The Company has now embarked on a second program of expansion. Both programs should be substantially completed by 1958, when capacity is scheduled to rise to 2 million tons of ingot steel a year, or 1} million tons of finished steel. The total investment program of the Tata Company is expected to be the equivalent of about $250 million for the period April 1955 to March 196<>. The second program consists of further modernization and of additions to the existing plant throughout the, whole process of steel production. For processing the raw mate. rials a ~;w battery of'. coke ovens will be installed, the existing batteries • emodeled and expanded, and new ore crushing and aintering plants ·ivill be built. A  - 2 - new blast furnace will provide an increased capacity of 1,650 tons of pig iron a ~ay. ., Steel making capacity will be raised by adding two 200-ton open hearth furnaces and a new 32-ton co~verter; the capacity of the existing furnaces and converters will also be increased. Rolling capacity will be increased by a new 46-inch blooming ·nill, a new sheet bar ~d billet mill, and a medium and light structural mill. This expansion of capacity will also involve extension of various facilities and services throughout the plant and its mining operations. The company has engaged the Kaiser Engineers Division of the Henry J. Kaiser the Kaiser Engineers Overseas Corp. , of the United States, to design :!ompany and. and supervise the constru~tion of most o:t' the works involved in the second expansion program. The works to be designed and supervisedby Kaiser are estimated:to cost about $130 million and. are to be completed by June 1958. The :Bank's loan will be disbursed against part of the foreign exchange costs of the~e works. All orders for imported equipment are b(--:-,-~ placed on the basis of international competition to the full.est \ I extent practicab~.:.~~ The loan is for a period of 15 years and will-carry interest of 4-3/41,, including the statutory 1% commission charged by the Bank. Amortization payments will begin on . December 1, 1959, ending June 1, 1971. The loan is guaranteed by the Indian Government, and'will be secured by a Trust Deed, with Baring Brothers 8c co., Limited, of London, as Trustees, constituting a first mortgage on the Tata Company's immovable property, mines,· machinery, plant and equipment, and a first floating charge upon the Company's under- taking and assets. This is the Bank's eighth loan to India, bringing total loans there, net of can-, • cellations, to $199-9 million. It is the second loan which has been made tor the expansion of steel production, the first being to The Indian Iron and Steel Cc:mpany, Linlited. After the loan had been approved by the Bank's Executive Directors, the Loan Agreement was signed by Mr. E.T. Warren, President of Tata Incorporated, Bew York, on behalf of The Tata Iron and Steel Company, Limited, and the Guarantee Agreement was signed by His Excellency G.L. Mehta, Indian Ambassador to the United States, on behalf of the President of India. Eugene R. Black, President, signed the Loan and Guarantee Agreements on behalf of the World Bank. •