Announcement of Sixty-two Million Dollar Credit to India for Railway Development on October 26, 1964

•... i • INIERNATIONAL DE'VELOPMENT ASSOCIATION 1818 H STREET, N.W., WASHINGTON 25, D. C. TELEPHONE: EXECUTIVE 3-6360 IDA Press Release No. 64/22 Subject: $62 million credit to India October 26, 1964 for railway development The International Development Association (IDA), an affiliate of the World Bank, today extended a development credit of $62 million to India to help the Indian Railways to finance imports of materials and equipment needed in the Rail- ways' development program during the 15-month period ending September 30, 1965 The credit brings the total of IDA funds made available for the Railways to $129.5 million, including a credit of $67.5 million made in March 1963. In addi- • tion, the World Bank ha.s made available, over the past 15 years, $378 milli?n in six loans to help finance the Railways' rehabilitation and development programs. Thus, in all, the Bank and IDA have provided loans and credits totaling over $500 million for the Indian Railways -- by far the largest amount that these two institutions have lent for any single enterprise anywhere. With 56,000 route-kilometers, India's railway system is one of the world's largest, and handles the bulk of both freight and passenger long-distance traffic. Demands for transport are rising steadily as a result of the growth of iron and steel production, development of iron ore for export, the growth of coal consump- tion and of industry generally. A large part of the increased traffic is in bulk commodities, which can be most economically moved by the railways. Under both the Second Five-Year Plan (1956-1961) and the current Third Plan (1961-1966), the Railways are accounting for about one-fifth of all investment in the public sec- ~ tor. This investment, combined with efficient working of the system, permitted an increase of 54i in freight traffic and of 32% in passenger traffic during the  - 2 - • past seven years. Railway capacity in India has now managed to catch up with traffic demand, after a long period of transport shortage. The Railways last year carried 179 million tons of freight and 2.4 billion passengers,and it is expected that by 1966 freight traffic will reach some 225 million tons, and passenger tr~ffic will be 15i higher than it was in 1961. Traffic growth at this pace requires a large and continuous program of invest• ment in the Railways. A World Bank-financed study looking into the problem of transporting coal in India, completed this year, has confirmed that the Railways will continue to be the chief mode of transport for substantially all of India's coal and other bulk commodities and that India will have to plan and invest accordingly. The railway investment.program in the Third Plan is now estimated to in- volve an expenditure ot 15,815 ~llion rupees ($3,321 million), of wi"iich Rso 2,740 million ($575 million)will be in foreign exchange. speeds. The program places emphasis on equipping the existing system to carry heavier trains at higher An increasing proportion of the traffic will be hauled by diesel or • electric locomotives; some 2,400 route-kilometers of track a.re being electri- fied; about 2,40o kilometers of new lines are being constructed; and about 102,000 freight wagons are being acquired. In addition, workshops, bridges, yards and signaling works are being improved. The program is already well advanced. In order to reduce torei~ exchange expendt+\1res, the Railways·are extend- ing the manufacture of railway equipment in India to electric locomotives at the Chittaranjan Works and to diesel locomotives at Benares (Varanasi). The present IDA credit will finance the import of steel and components for locomotives, electric multiple units, coaches and wagons, track and signaling equipment and materials for the electrification program, during the period from July 1, 1964 to September 30, 1965. Orders for imported equipment are placGd on -- the basis of international competitive bidding. f ' - 3 - • by The Indian Railways are owned by the Central Government, and are managed a statutory Railway Loard, which is responsible to the Minister of Railways. The Railways are run on commercial lines, and have consistently operated profitably. The proceeds of the credit wili be made available to the Railways by the Government of India as additional "capital-at-charge" on which the Rail- ways will pay a dividend presently fixed at 5-3/4% per annum. The IDA credit of $62 million to the Government of India is for a term of 50 years, with repayment of the principal beginning on September 15, 1974. Therea~er, 1% of the principal will be repayable annually for 10 years, and '3% will be repayable annually for the final 30 years. The credit is free of interest, but a service charge of 3/4 of 1~ per annum on the amount withdrawn and outstanding will be made to meet IDA's administrative costs . • •