Announcement of Fifty Million US Dollars Loan to India for Railways on October 13, 1961

,e. • I _. FOR IMMEDtATE RELEAS~· . ., , WORLD • INTERNATIONAL BANK FOR RECONSTRUCTION Af'~D DEVELOPMENT 1818 H STREET, N.W., WASHINGTON 25, D. C. TELEPHONE: EXECUTIVE3-6360 Press Release No. 715 SUBJECT: $50 million loan to India October 13, 1961 for railways ':rhe World Bank today made a loan equivalent to $50 million to India, to assist the development program of the Indian Railways. The loan will help to meet the cost of equip~nt and materials to be :imported over the coming year. Five commercial banks are participating in the loan, 'without the Bank's guarantee, for a total of $1,075,000, covering the entire first maturity, due • February 15, 1965, and part of the second maturity, due August 15!, 1965 • The bank~ are: Bank of America NoT. & S.A., San Francisco; First National City Bank, New York; Ma~ufacturers Hanover Trust Company, New York; Fidelity - Philadelphia Trust Company, Philadelphia; and the First Pennsylvania Banking and Trust Company, Philadelphia. The development program of the Indian Railways has a very important place in too Third Indian Five-Year Plan, which beg'an in April this year. One of the largest railway systems in the world, the Railways handle the bulk of long- distance freight and passenger traffic in India. Large investments will be required if' the railways are to }.ceep pace with the requirements of the Plan, whose production targets imply~ 75% increase in railwa.v freight traffic (mostly in bulk commodities such as coal., iron ore, steel and cement), and a ,. 15% increase in passenger traffic. i • - 2 - Sine e In.de~~ndenc e, continuous and heavy exper..di t-.ir~~ -- first or1 post- wru.· rehabil'.ita.tion :md then on modem ization and expansioi, - hc1ve beeu t1:i.1cle:.i..""- t.:1ken by the Railwa:y-s to serve the de·veloping economy of India. During 1956-ll ,, (the Second Fi-ve-Year Plan period) alone., the Rmlt-;ay3 invested the equivale:t 0f $2:.300 million. The World Bank has played a large part 1n providing the f )reign r;:>.xchange needed for imports of equipment and services: even bPfort t.n·" present loan, its total lending for ·the Indian Railways amounted to $329 wi~J fon -- ea.sily the largest a"nount lent by the Bank for a sing.le enterprj '3 e,. Great efforts have been made, by developing the manuf actnre of I·a"tlway equip- ment in India, to reduce the Railways t dependence on imported equintient, with such success that the proportion of total expenditure ever the next. five ye '.n.. ~ t.:> be finan~ed in foreign exchange is less than half as GrP::,.t as in thP • previous five years. Nevertheless, nearly $400 million will have to be spent 1:--;r the Railwa:rs op foreign goods and servj.c es. between ~pw and 1966. Rmphasjs over the next few years will be pla9~<:i' on increa.sing t,raffic ca.J;ac:.ty by equipping t.he existing railway system to run heavier "trains at hi~her speedn. To this end., more diesel locomotives are to be bought, about ; ' 1,300 route-miles of track will be electrified., large-capacity freight cars ., wi.11 Le acouired, and heavier track will be laid down . Over the next five years, \ a total of over 1.,800 new locomotives (steam, diesel run electric), nearly 1,900 passenger cars., and 117,000 freight ca.rs are to be brought into service. A~ the same time, large sums will be spent on railway workshops, track, bridges, traf1'ic and signaling works and equipment, electrification and the addition of about 1,200 mjles of new lines to the railway system. The greater part of the f..,reign excha.nge cost of this program will have to be met over the next two or • three ye;-:rs.,  -3- • The lti,?ian Rxilways are owned by the Central Gover:nn1d:rit and are manage:d on cornmerciitl lines by a statutory Rail1fay Board, which is re..-.,'J)ons ible to·· the m.nis ter of nailways. The Railways have consistently operated on an economic and profitable basis. 1 rhe Bank's loan is for a term of 20 years, and bears interest at 5-3/h%, !.ncluding the 1% commission which is allocated to tl'1e Bank's Special Resert·e. Repayment of the loan will begin in February 1965u •