Announcement of Thirty-Five Million US Dollars Loan to India on August 9, 1961

;.,t ~·' •. FOR IMMEDIATE RELEASE W O R L O i:J ·..,:1. . N K, • 1818 H STREET, N.W., WASHINGTON 25, D. C. TELEPHONE: EXECUTIVE3-6360 Press Release No. 706 SUBJECT: $35 million loan August 9, 1961 to India The world Bank today made a loan equivalent to $35 million to India ta assist the private coal mining industry to expand production. To meet the ind'listrial goals of the Third Five-Year Plan, India's annual production of coal will need to be increased by some 801, above present output -- from 54.6 million to 97 million tons in 1966, the last year of the Plan period. Private companies, as their pa.rt of the program, intend to expand existing facilities and open new • mines to increase their annual produ~tion of coal from 44 million to 61 mil- lion tons. The loan will make available the foreign exchange required to import equipment for this expansion. Four private banks a.re participating in the loan, without the World Bank's BUaran.tee, to the extent of $875,000 representing portions of the first maturity "Which falls due in May 1966. The participating banks a.re Bank of America National Trust and Savings Association, Irving TrUst Company, Wells Fargo Bank American TrUst Company, San Francisco, and the New York Agency of' The Hongkong and Shanghai ;e~ng Corporation. India's abundant reserves of coal are among its most important natural re- sources and the basis of its industrialization. Half the country's electricity supplies are generated from coal, the railways are run almost entirely on coal, and expansion of' the steel industry is predicated on large reserves of coking • coal.. to 54~6 Despite an increase in the· annual production of coal from 38.2 million million tons during the Second Five-Year Plan, there was still a  •. -· - 2 - • shortage which hindered the growth of .industrial production. The coal produc- tion target of 97 million tons was a.rrived at by a consideration of the :tequire- ments during the Plan period for all the principal uses of coal for railways, steel, electric power, brick kilns, cement, textiles, domestic coke 0.&.YJ.d small industry, shipping and export, chemicals, foundries, paper, refractories and glass. Emphasis will be placed. on prodµcing mor,e coking coal, used for steel- maJ{ing, and other high quality coal, most of which comes from mines operated by private companies. In view of the importance o:f' the private coal industry to the attainment of this goal, the Government has taken a number of measures to enable the pri- vate companies to expand production, including a system of subsidies f'or mines with difficult operating conditions, permission to open new mines and an • assurance of policies favorable to contim:ted production by private companies • The Government is also taking steps to ass:i.~·:rt the industry through the provision of sand-stowing facilities. India's largest coal reserves are lo- cated in the states of west Bengal and. Bihar in the northeastern pa.rt of the conntry. Most of the operations of the private sector are underground which .· in India require a special technique of' mining because of the extraordinary thickness of the coal seams -- some up to 100 feet. When coal is taken out it must be replaced with sand. to permit the maximum to be recovered without cave-ins; the availability of sand, therefore, has an important bearing on the expansion of coal production. In order to increase facilities for sand stowing, the Government will construct seven central ropeways from river-beds to supply sand to about 50 mines in the private sector. A crucial problem facing the Indian coal industry today is transport. • Virtually all the nation's coal is now moved by rail and since most of it .t_, ,~ • ... •. • - 3 - is located ·in a relatively small area, ther,e is a great concentration of rail traffic. Few minea have the space or facilities for stockpiling and are forced to curtail production very quickly if output cannot be moved. The Government therefore is ta.king measures to improve the rail facilities for the transport of coal and al.so to provide for the movement of greater quantities by coastal shipping. Much of the coal used in steel production has to be washed to de- crease the ash content, and the new washeries being built near the mines will also alleviate the transport problem by reducing the bulk of shipments to some extent. Several hundred private collieries will participate in the expansion pro- :sram for which the Bank loan was ma.de. They repret:>,nt all segments of the • i.z.1.dustry from small, individually-owned units to large groups of companies controlled by managing agents. The total cost of the program to be carried out by the private coal industry during the Five-Year Plan is estimated at the equivalent of $116 million. It is expected that the private companies will be able themselves to provide the rupee financing for this expansion, but they will need access to foreign ex- change for imported equipment. The Bank loan w:Lll provide $30 million for im- ported spare parts, replacements and·equipment required during the first two years of the Plan period for the expansion o·f existing mines, "and $5 million for the opening of certain new mines ·which shquld take about fol.Jr years to complete. The loan is for a. term of 15 years and bears interest a.t the rate of 5-3/4% per annum including the 1%-com.mission wilich is allbcated.to the Ba.nk 1 s·specia.l • Reserve. Amortization will begin :in May 1966.