Announcement of Indian Railway Loans on July 12, 1957

FOR IMMEDIATE RELEASE WOIILD i! ' ! • 181 8 H STREET, N. W., WASHINGTON 2 5, 0. C. TELEPHONE: EXECUTIVE 3-6360 Press Release No. 489 July 12, 1957 Subject: Indian Railway Loans. · Eugene R. Black, President of the World Bank., today a."lnounced that the Bank has agreed to make four loans to India -- one in Japanese yen, one in pounds sterling., one in Italian lire and one in United States dollars and other currencies -- to assist a program for modernizing and developing the Indian Railways. The funds will be used to help meet payments on imported equipment which fall due in 1957 and 1958. An agreement signed today by the Indian Ambassador in Washington, Mr. G. L. • Mehta., and 11r. Black, embodies loans of 8.,640.,000,000 Japanese yen (equivalent to $24 million); 6,825,000 pounds sterling ($19.111 million); 7.,000,000.,000 Italian lire ($11.2 million); and United States dollars and various Etn"opean currencies equivalent to $35.7 million. The Indian railway system is the fourth largest in the world, comprising nearly 36,000 route miles. With the exception of a few miles of narr,ow gauge line, the S-,fS tem is owned by the Government, and managed and operated by the Railway Board, which is a part of the Hinistry of Railways. 'I1he Board and its staff run the railways efficiently despite much over-1 age rolling stock and inadequate equipment. The railways are by far the most important form of transport in India, where highways, river and coastal shipping cannot hancD.e large volumes of long-haul · traffic. L11provement of the railway eystem is vitaJ. to the success of the Secoi1d • Five Year Plan now under way. During the five years of the first Plan, which began in April 1951., freight carried by railroads grew by one-fifth, reaching 115 million tons in the final year. Growing production and trade continue to exert increasing pressure on the railways: the handling of coal and mineral ores, I - 2 - JI l which account :f'or 40% of freight, will expand further to feed new steel capafity ~\ now being built and to move iron ore for export • • The Railways are now carrying out a five-year program to increase freight capacity by 40%, from 115 million to 162 million tons a year, and to increase passenger capacity by about 15%. The proposed expenditure on the railway program under the Second Five Year Plan is 11,250 million rupees ($2,363 million equivalent) of which some 4,250 million rupees ($893 million equivalent) is required in foreign currencies for the purchase of essential goods, materials and equipment which are either not produced in India or of which the domestic supply is insufficient. The most important objectives of the program are the acquisition o,f more than 2,300 locomotives, ll,500 passenger cars and 107,000 freight cars; the doubling of about 1,600 miles of main-line tracks; the renewal of 8,000 miles of track; the construct l r.-':1 of about 850 miles of new lines to give access to coal and ore fields • and to relieve congested areas; improvements in yards and signaling facilities; and the electrification of mainlines in regions of high density passenger and freight traffic, particularly the Calcutta area. The Bank's loans will pay about half the cost of purchasing from abroad goods and equipment on which payment falls due in 1957 and 1958. These purchases include more than 500 locomotives, 10,000 freight cars, 100,000 wheelsets, 1,500 underframes, rails and other materials and equipment. These items have been ordered, on the basis of internationaJ. bids, in various countries. All the loans are for a term of 15 years and bear interest of 5-5/8% including the 1% commission -which is allocated to the Bank's Special Reserve. Amortization will begin July 1, 1961. The loans were approved by the Bank's Executive Directors on July l2o This is the second time the World Bank has lent funds for the Indian Railways. • A loan of $34 million made in August 1949 was used to purchase 418 locomotives, boilers and miscellaneous spare parts, and helped to remedy a serious shortage of motive power. In addition to the railway loans, the Bank has made other loans in India for the development of electric power, agriculture, iron and steel production, for the purchase of jet passenger aircra~, and to provide funds to a development corporation for investment in private enterprises.