Announcement of Eighty-Five Million US Dollars Loan to India Approved on September 12, 1958

W O R L D ,ill A N K • INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT 1818 H STREET, N.W., WASHINGTON 251 D. C. TELEPHONE: EXECUTIVE 3-6360 PRESS RELEASE NO. 553 SUBJECT: $85 million loan September 12, 1958 to India approved The World Bank ha.s approved a loan equivalent to $85 million to India to help meet the foreign exchange costs of a program to improve and expand the Indian Railways, an important part of India's Second Five-Year Plan. The First Pennsylvania Banking and Trust Company, of Philadelphia, Will participate in the loan, without the World Bank's guarantee, to the extent of $500,000 representing parts of the first five maturities which fall due between January 15, 1963, and January 15, 1965 . • The Bank's loan will help pay pa.rt of the cost of rolling stock, locomo~ives and other equipment required for the expansion program and Will meet a large part of the payments already ma.de or to be made for such equipment during 1958 and the first quarter of 1959. The loan should be completely disbursed by the end of March 19 59. By that time, it is expect~d that $15 million will have been disbursed from the Bank's recent $25 million loan for electric power development in the Da.moda.r Valley. As a result, the equivalent of some $100 lllillion, over and above disbursements on earlier 13ank loans, will be ma.de available to India by the Bank during the remainder of India's current fiscal year. This constitutes the Bank's part in the arrangements recently discussed by the Bank With representatives of the Governments of Canada., Germany, Japan, the United Kingdom and the United States • for covering India's additional foreign exchange requirements of $350 million dut"ing this period.  r • - 2 - I The Indian Railway system, the fourth largest in the world, is owned by •• the Government and managed and operated by the Railway Board, a part of the Ministry of Railways. The railways are by far the most important form of transport in India, and carry large volumes of long-haul traffic that highways, • river and coastal shipping do not handle. Improvement ,and expansion of the railways has progressed satisfactorily in the Second Five Year Plan and the shortage of rail transport is now less acute than it was two years ago. Adjustments in the program are continually tr.ta.de to meet the needs of traffic as they develop. Since July 1957, when the Bank lent Tndia the equivalent of $90 million for the railways, the program has been revised to provide for an increase in freight-carrying capacity. During the Plan period, it is now intended to increase freight capacity of the railways from 114 million tons annually to 168 million tons, instead of the 162 million originally • planned. This will require the purchase of 11,000 additional freight cars ever the 107,000 originally intended. Plans to ·meet a 15% increase in passenger tr~ffic during the Plan period remain unchanged. The approved expenditures on the railway program under the Second Five-Year Plan were to be 11,250 million rupees ($2,363 million equivalent) of which some 4,250 million rupees ( $893 million equ.ivalent) would be required in foreign currencies for the purchase of essential gc~ods, materials and equipment which are either not produced in India or of which the domestic supply is insufficient. The additional increase now planned in freight capacity should be attained Without adding substantially to the original estimates of total costs, and With an actual reduction in the foreign exchange costs. This will be achieved by improved operating efficiency and the postponement of certaj..n less essential parts of the railway program. The loan Will be for a term of 20 yea.rs and will bear interest of 5-3/4% including the 1% commission w'hich is allocated to the Bank's Special Reserve. • • - 3• Amortization Will begin January 15, 1963. This Will bring the total am:>unt of loans which the Bank has made to India, net of cancellations, to $507 million; the net 8mlunt held by the Bank, a~er allowing for repayments and amounts sold to third parties, is $450 million. The loan was approved today by the Bank's Executive Directors and the loan documents are to be signed on Tuesday, September 16, by Mr. Harishwar Dayal, Minister, Charge d'Af:f'aires of the Embassy of India in Washington, on behalf of the Government of India, and by Mr. Eugene R. Black, President, on behalf of the World Bank • • •