/-i 7/ IIV-> F117 PRD

Public Disclosure Authorized

APPENDIX 4
L-172-
RESTRICTED

i his report is restricted to use within the Bank.

Public Disclosure Authorized

INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT

FILECOPY
Public Disclosure Authorized

TECHNICAL REPORT

ON THE

IISCO-SCOB IRON AND STEEL PROJECT

IN

INDIA
Public Disclosure Authorized

December 4, 1952

Loan Department
 Rate of Exchange of Indian Currency

1 Indian rupee a US $0.21

1 US dollar * Rs. 4.762

1 lakh of ruJees . US $21,000

(Rs. 100,000)

1 crore of rupees . US $2,100,000

(Rs. 10,000,000)
 TECHNICALREPORT

ON

IISCO-SCOB IRON AND STEEL PROJECT

I ND IA

Page

I. Purpose and Scope of Report 1

II. India's Iron and Steel Program 1

III. The Borrower 2

IV. Description of the Project 3

V. Raw Materials 5

VI. Transport 6

VII. Power 7

VIII. Market 7

IX. Estimated Cost of Construction 9

X. Estimates of Cost of Production 9

XI. Schedule of Constructionand Disbursement1R

XII. MHethod of Financing 11

XIII, Justificationof the Project 19

XIV. Conclusions 20
 TECHNICALREPORT

ON

IISCO-SCOB IRON AND STEEL PROJECT

I ND I A

I. Purpose and Scope of Report

1. In June, 1952, the Bank sent a llissionto India to examine the

problems connectedwith the proposed expansion of the steel industryand
to report on the specificprojects as the basis for a possible loan. The
llissionstudied:

(a) the need for expansion of Indiats iron and steel industry;

(b) the best methods of ac'omplishingthis expansion;and

(c) the extent to which Bank financingmight be required.

2. In the course of its investigations,the PMIission

discussedIndia's
iron and steel problems with Government officials,officers of steel com-
panies and others. Miethodsof financing the overall and individual
programs were also explored.

II. India's Iron and Steel Program

3. The producers of iron and steel in India, in the order of their

1951 production,are:
Finished Pig
Steel 1/ Iron 1/
The Tata Iron and Steel Company, Ltd. kTons)
(Tatas) 793,000 _
Indian Iron and Steel Company, Ltd.
(IISCO) 2/ - 640o,ooo
Steel Corporationof Bengal, Ltd.
(SCOB)2/ 254,ooo -
M,ysoreIron and Steel Wlorks 29,000 9,000

4. The overall industry also includes about 25 "Re-follers",wvhose

aggregate primary productionis small.

5. The plant of the Tata Iron and Steel Company, Limited is located
at Jamshedpur,about 150 miles from Calcutta. This is the largest inte-

1/ All tons in this report are 2,240 pounds.

2/ Of the iron production shown for IISCO, 330,000 tons were supplied to
SCOB for steel making.
 -2-

grated steel mill in India and makes a broad range of iron and steel pro-
ducts* The plant, in maintaining maximumproduction during the war, suffered
greatly through lack of proper maintenance. Tatas, now that material is
available,have starteda 7-yearprogramprimarilyof modernization, al-
thoughtheyare addingto plant capacitywherepossible. Tatastprogram,
when completed, is estimated to increase production from 750,000 to
931,000 tons of finished steel products per year, The Governmentrequested
Tatas, if possible, to expedite their program. Since the program was being
financed from earnings, Tatas was unableto c?ply with the Government's
request without an increase in the retention - price of steel.

6. SinceJuly 1, 1952, the Government increased the consumer price of

steel (insteadof the retentionprice)by Rs. 100 per ton for the purpose
of makingsufficientfundsavailablein the Equalization Fund to finance
India'ssteelexpansionprogram. Because of the Government'sactionin
raisingthe priceof steel,Tatas is now in a positionto obtainadvances
from the EqualizationFund which the Governmentof Indiahas offeredto
them,and to acceleratetheirexpansionprograms
7. MysoreIron and SteelWorks wrasfoundto have its expansionpro-
gram alreadyunderway with the aid of Governmentfinancing.Any expansion
of the "Re-rollers"couldbe financedby ordinarydomesticmeans.

8. The IISCO-SCOBprogrampresented,in the Ilission'sview,the most

favorablepossibilityfor rapid and economicexpansionof India'sironand
steelcapacity.Accordingly, this reportis limitedto the projected
expansionof IISCO-SCOB.

III. The Borrower

9. IISCO-SCOBare physicallyintegrated; but, they are, at present,

legallyand financially independent corporateentities. However,under
the provisionsof the Ironand SteelCompaniesAmalgamation Ordinance,
1952,the two companieswill be amalgamated as of January1, 1953by the
transferof the undertaking, assetsand liabilities of SCOB to IISCOwhich
will then carry on the combined undertaking; SCOBwill then cease to
existand the loan is proposedto be made to IISCO as the survivingcom-
pany. This mergerhas been approvedby the shareholders of both companies.

10. IISCOand SCOB togetherconstitutethe secondlargeststeel

producerin India. SCOBtspresentannualsteelcapacityis about25% of
Indiaastotaloutput. IISCOproducesabout64o,000 tons of ironannually,
or about43% of India'stotalproduction.
11. IISCO-SCOBis located in the general area of Burnpur, near Calcutta.
The two companiesbesidesbeingphysicallyintegratedare furtherinter-
lockedby havingcommonmanagingagents(IMlartin Burn,Ltd. of Calcutta),
by a profit-sharingagreementwherebyIISCCreceives20% of the net profits
of SCOB,and by IISCO#sownershipof about30% of the outstanding sharesof
SCOB.
1/ See Paragraph 39, page 12
 -3-

12. IISCO ovmsand operatestwo plants. The oldest,established at

Kulti in 1874, is used exclusively for the manufacture of foundry iron.
The main plant at Burnpur was constructed in 1919 and is used primarily
in supplying hot metal to SCOBfor the making of steel. About half the
iron output of the tvwoKulti blast furnaces supplies its own foundry re-
quirements and the remainder is produced for sale.

13. IISCOts main works at Burnpur, consisting of two blast furnaces,

coke ovensand othernecessary auxiliaries, supply hot iron to SCOBunder
an agreementbetweenthe two companieson a cost plusprofit-sharing basis,
Iron not neededby SCOB is availablefor sale. IISCOalso, underthe same
agreement,furnishesSCOB all utilityand otherservicerequirements.

14. IISCOalso ownsand operates threecollieriesand two iron ore

mines.

15. SCOB, organizedin 1937 by the managingagentsof IISCO,started

productionof steelin 1939, Its pIant was initiallylaid out for an
ultimatecapacitythroughexpansion of about 1 million tons per year. Pro-
ductionat the presenttime is about 350,000tons. The SCOB plantcon-
sistsof a duplexmeltingshop,a bloomingmill, structural, rail,merchant
and sheetmills,and a galvanizing plant.
16. The directorsof IISCO-SCOB'smanagingagencyare men of wide
experiencein theirrespectivefields. The presentworksmanagementis
also well qualifiedand no additionalkey personnelwouldbe requiredto
operatethe expandedfacilities.

17. Both IISCOand SCOB showa sound financial condition. 1I\hile the
ratio of debt to equityin IISCO'spresentcapitalization is somewhat
aboveaverage,SCOB is more conservative in thisrespect. Summaryearn-
ingsand balancesheetsfor IISCO and SCOB are givenin SchedulesIII
and XIII.

IV. Descri2tion
of the Project

18. The projectunderconsideration is one of majorexpansionof the

Burnpurworks and modernization of Kulti. The projectis designedto
increaseannualiron productionfrom about640,000to 1,400,000tons
(400,000 tons being for sale), and finished steel from about 350,000 to
700,000 tons per year as shown in the following table:
Products for Sale
(Tousands of Tons)

1953 1957
FiniiThe;T Finished
Iron Steel Iron Steel
Burnpur orks 60 350 300 700
Kulti -orks 100 - 1.0 -

IISCO-SCOB Total 160 350 400 700

19. The additional facilitiesneeded by IISCO-SCOBto increase their
iron and steel productionby the proposed amount are as follows:

Burnpur ;orks

(a) Coke Ovens

New coke ovens, increasingpresent output by 115%, would

consist of t-iobatteries of seventy-eightovens each iath
one battery replacing a 40-oven battery vwhichhas been in
service since 1929. All ovens would be arranged to use
blast furnace gas. The by-products plant would be corres-
pondingly increa-sedto serve the new ovens.

(b) Blast Furnaces

The number of blast furnaces would be doubled by the

addition of two units, each having a daily output of 1,200
tons of iron. There also would be included the necessary
new stoves, steam-drivenblowers, and gas cleaning equip-
ment.

(c) Duplex Converter House

The present building would be extended and equipped

for the installation of a third 25-ton (per charge) acid-
lined converter thereby increasing converter capacity by
50%.
(d) Steel Making Shop

The present steel making capacitywould be increased by

a second melting shop consistingof two 240-ton (per tap)
tilting basic open hearth furnaces. This would require a
new building equipped laiththe necessary cranes, ladles,
and scrap cars.

(e) Additions to Steel Rolling Sills

The number of soaking pits would be increased from 8 to

11. The finishing departments of both the 34" and 18"
mills wrould be extended to handle additional tonnages,

(f) Services

Ancillary services such as water, gas, power and steam

would be increased to serve the plant's additional facilities.

Kulti _.orks

The Kulti furnaces are very high cost producers and, unless
modernized, vwould have to be abandoned. hiodernization would con-
sist of (1) scrapping of the existing coke ovens (coke in the
future would come fron Burnpur); (2) installationof gas
cleaning equipment; (3) installation of a 5,000 Kw. steam turbine
generator to permit the utilization of waste blast furnace gas as
fuel.
 -5-

20. The InternationalConstructionCompany, Ltd., of London, the

Company's consultingengineers,have completed all of the necessarypre-
liminary engineeringon the project and are prepared to proceed immediately
with detail design and procurement.

V. Raw M1aterials

21. India is rich in the necessary raw materials for the making of
steel. The proximity of these materials makes the assembly costs on a ton-
mile basis among the lowest in any steel producing country, These marerials
are also of excellent quality. The iron ore carries an especially high
iron content averaging about 60% as mined.

(a) Coal

The IISCO-SCOBplant is in the center of India's metal-

lurgical coal fields. The Company ovms and operates three
collierieswhich could supply about one-fourth of the
expanded plant's coal requirementsfor a period of 25 years.
The additionalcoal requiredwould come from other privately
owned collieriesin the immediatevicinity.

The Committee on the Conservationof iJ,etallurgical

Coal
in their report dated 1950 show Indiars reserves in working
collieriesto be 2,100 million tons. At the present rate
of consumptionI/ of 11.0 million tons per year, these
reserves will last about 190 years. Reserves will be in-
creased if plans to limit the railroads to non-coking coal
are implemented.

(b) Iron Ore

All of the iron ore used by IISCO-SCOBcomes from the

Gua area about 150 miles by rail from Burnpur. About 55%
comes from the Companyls own mines and the remainder from
other sources. The proposed project includes expansion
of the Company's mine at Gua to take care of its total
future needs.

The reserves in the Gua area are estimated to be 470

million tons above the 2,260 foot level or equal to about
an 80-year supply at the estimated 1956 rate of consumption.

(c) Scrap

The Duplex Process, in which pig iron is first treated

in a Bessemer converter and subsequently in an open hearth
furnace, uses very little scrap and has been almost univer-
sally adopted in India as the method of making steel with
the type of pig iron produced. In this process, the open
hearth is used to remove phosphorusand condition the heat
for tapping, the charge being in the furnace about three hours.

17 The railroads consum-eabout 6 million tons of coking coal per year.

 -6-

The Blo=n Letal Process could be used instead of the

Duplex Process. The Blown iJetalProcess would permit the
use of large quantities of scrap3 however, the charge
would be in the open hearth furnace from 6 to 10 hours,
To use more scrap therefore would require a greater
amount of open hearth capacity, In proposed process this
additional capacityis being provided ;or and in the
future no mill scrap will accumulate!Y. Use of mill
scrap will increase ingot tonnage by about 20% without
the need of increasingpig iron capacity.

It is believed by Governmentthat the "Re-rollers"vill

take most of the national scrap as it becomes available
for use in their own electric furnaces. Accordingly,
present plans do not contemplateits use by the large
steel producers, although it wlouldbe done should it become
available in sufficientamounts to warrant its use.

(d) Limestone

All the limestone now used by the Burnpur works come

from a privately owned quarry at Gangpur about 150 miles
from the plant. There are rmany other limestone deposits
of suitable quality throughoutIndia which in the aggre-
gate greatly exceed the steel industry'sneeds.

(e) ilanganese Ore

liostlarge steel producing countries includingthe U.S.

are without sufficientreserves of manganese. India, on
the other hand, has large deposits in most of the provinces
and is the free world!s chief source of manganese ore sith
exports novwaveraging about 1,000,000 tons per year k.I
Estimates of reserves vary widely, but the reserves are more
than adequate for this project.

All the manganese ore needed by IISCO-SCOBcomes from

their omn mine at Gua.

(f) ,iateer
The IISCO-SCOB plant is located Very close tb the Damodar
River} which is an adequate source of water,

VI. Trans2ort

22. The Burnpur plant is located about 4 miles from the railroad center
of Asansol from which main lines of the National hailroad go directly to
Calcutta, Delhi, Bombay and Iadras. The location is excellent, not only
for the assembly of raw material, but also for distributionof steel to the
main consuming areas without rehandlingor re-shipping.

1/ Accumulated mill scrap is novwabout 400,000 tons for the entire steel
industry.
2/ The U.S, imports about 2,000,000 tons of manganese ore per year from
all sources.
 -7-

VII. Power

23. The presentpower demand of IISCO-SCOBis 23,000Kw, lihenthe

proposedprojectis completed,the demandwill be about 33,000Kw. The
presentthermalpowver plantwith a generatingcapacityof 116,000 Kw, will
be ampleto meet the new load requirements.The marginof reserve,how-
ever,wouldnot be adequate. Accordingly, therewill be a tie-inline to
the DamodarValleyelectricgrid systemwith additionalelectricpowier
being purchasedwhen needed. The tie-inline and 20,000Kw. sub-station
vill be suppliedby the DamodarValleyCorporation.

VIII. Miarket

24. The fact that steelis novrbeingallocatedis evidenceof a serious

shortage. If not corrected,this condition will lead eitherto further
curtailmentin the use of steelor to an increasein foreignexchange
expenditureto importlarger quantities.
25. Variousfieldsof engineering were studiedto determinepossible
changes in future steel requirements. E'timated changes in unit production
of the steel consuming engineering fields are as follows:
AnnualUnit Production

1956
Actual1951 EstimTated
HeavyEngineering

Locomotives 170
Locomotive
Boilers - 100
Automobiles 12,768 25t,000
Ships (8,000 Ton d.w.t.) 2 5

Light Engineering
IIachine Tools 1,100 4,600
Looms - 8,000
Ring Frames - 1,000
Carding Yiachines 6oo
Pumps 36,260 78,120
Diesel Engines 5,540 50,060
Bicycles 99,000 500,000

Construction
Cement (Milliontons) 3.1 5.5
26. The Governmenthas estimateda demandfor finishedsteelfor 1952
of 2.34 milliontons and for 1957 of 2.80 milliontons. Demandin India
is particularly sensitiveto pricechanges. This is evidencedby the fact
that very few consumersimportsteeldirectlyat prevailingCIF prices
 -8-

although permitted to do so by the Steel AllocationsOffice. Instead,most

consumerselect to go through the delays in obtaining an allocation in
order to take advantage of lower subsidizedprices.

27. hile the need for greater utilizationof steel in India is quite
apparent, it is doubtful whether tonnages greatly in excess of those now
being consumed could be purchased immediately. Increase in the demand for
steel rrouldtherefore probably occur gradually as in the past but may
acceleratebecause of the effect of the 5-year Plan.

28. Steel consumptionsince the war has increased at the rate of approxi-
mately 6% per annum but this rate would probably have been somewhat greater
had larger quantities of lower priced domestic steel been available, On
the basis of available data, the market will probably increase at a rate of
about 7% per annum, as projected in the following table:

Annual Finished Steel Consumption

(Iillions of Tons)

Actual Estimated
Year Tonnage Year Toage

1947 0,99 1952 1.30

1948 0.87 1953 1.39
1949 1.07 1954 1.49
1950 1.19 1955 1.60
1951 1,23 1956 1.701/

29. Demand for foundry iron is not increasing as rapidly as the demand
for steel. The critical shortage of foundry iron results from the use of
a greater percentage of blast furnace capacity to produce pig iron for
steel making with correspondingly less capacity to make foundry iron, For
this reason, output and consumption of foundry iron has been falling off
since 1949. On the other hand, steel productionat IISCO-SCOB (the major
producer of foundry iron) has increased in proportionto the decrease in
foundry iron.

Foundry Iron Consumption

Year 1947 1948 1949 1950 1951

Tons (000) 347 356 427 290 287
30. Information indicates that foundry iron was not cfitically short
in 1949. The market for foundry iron in 1956 is estimated at about 500
thousand tons,

31. The projected expansion of existing plants to produce about

1,700,000 tons of saleable steel and 500,000 tons of f£Qltl.z- JLror.by 1956
should satisfy Indiats short term steel and iron requiremen-,s.

1/ Approximatel;y 65% more than present production capacity.

 -9-

IX. Es"imated Cost of Construction

32. Estimates of the constructioncost of the project are based on the

recent quotationsreceived by the InternationalConstructionCompany from
major equipmentand machinery manufacturersand on present construction
costs at IISCO-SCOB, From all available data, the estimated cost of con-
structionbroken down into local and foreign exchange is as follows:

Estimated Cost of Construction

(Crores of Indian Rupees)

Item Local* Foreign* Total*

Coke Ovens 3.30 2.50 5.80

Blast Furnaces 3.80 2.90 6.70
Blast Furnaces (Kulti) 2,20 .80 3.00
Bessemer Plant .39 .26 .65
lMeltingShop 3.06 1.29 4.35
Rolling 11ills 1.50 .50 2.00
Services,for plant 1.35 1.45 2.80
lMines .45 1,55 2.00
Engineering - .60 .6o

Sub Total 16.05 11.85 27.90

Contingencies 2.69 1.15 3.84
Sub Total 18.74 13.00 31.74
Interestduringconstruction 1.25 2.00 3.25
GrandTotal 19.99 15.00 34.99

7 Freight included, and installed prices.

X. Estimatesof Cost of Production

33. Iron and steelproductioncostsare extremelyfavorablein India,

mainlybecauseof low cost,high qualityraw materials,relativelylow
labor costsand volumetonnages.For example,IISCOhas a workscost on
pig iron of aboutRs. 75 (Ml5.85)per ton wrhile
SCOB has a works cost on
steelingotsof aboutRs. 160 (i33.6O)per ton. These costsare consider-
ably lower than corresponding
costsin most steelproducingcountries.

34. IISCOtsworks costs,afterthe proposedexpansionhas been com-

pleted,shouldbe at least10%lless than presentday costsbecauseof
larger,more efficientfacilitiesand also becauseof a reductionin
overhead.
 -10-

XI. Schedule of Construction and Disbursement

35. Construction of the projectwould requirea periodof fiveyears.

The firstblast furnace, however,or one-halfof the new capacity,would
be finishedand go into operationat the end of the fourthyear.

Construction Schedule

Year 1953 1954 1955 1956 1957

First blast furnace Start - -R- Finish -

Second blast furnace - Start - - Finish

36. Disbursements would be scheduled approximately 9% in the first

year, 24% in the secondyear, 39% in the third, 18% in the fourth, and
10% in the fifth year.
 -11-

XII. Inethod of Financing

(a)_ TotalCash Requirements Period

over Five-YearConstruction

37. IISCOts total cash requirementsover the five year construction

period 1953-1957 are estimated at 55.14 crores of rupees, equivalentto
U.S. 4115,794,000. Some 81 percent of this sum,,44.91 crores (U.S.
equivalent $94,311,000) represents the cost of the projected expansion
program, current extensions,minor capital works, additionalworking
capital requirements,and interestduring construction,as set forth
below:

Equivalent
Crores of Millions of
Rupees U.S. Dollars Percent

Projected Expansion

Foreign currency costs

Constructioncosts 13.00 $ 27.30 29 %
Interestduring construction
(Interestand commitment charge) 2,00 4.20 4

Total foreign 15.00 31.50 33

Domestic currency costs

Constructioncosts 18.74 39.35 42
Interestduring construction
(To be accumulated on Govt.
loan) 1.25 2.63 3

Total domestic 19.99 14.98 45

Total projected expansion 34.99 73.48 78

Current ConstructionCosts 3.30 6.93 7

iMinorCapitalWorks 2.50 5.25 6

Housing .60 126 1

Capital Requirements
Additional1,iorking
(cash and inventories) 3.52 7.39 8

Total hL.91 $ 94.31 100

38. The remaining 19 percent of total cash requirements,or 10.23

crores (U.S. equivalent$21,483,000)represents; income taxes, 3 crores;
other interest, .82 crore; labor profit sharing bonus, .85 crore;
managing agents and directors remuneration,.83 crore; redemptions,1.48
crores; and dividends (preferredand ordinary shares), 3.25 crores.
 -12-

(b) Cash Generation over Five-Year Construction Period

39. Cash generation over the five-yearperiod, as representedby

gross income, is estimatedto amount to 19.21 crores of rupees (U.S.
equivalent ,401,341P,000). Of this amount, 10.56 crores comes from an
estimated 8 percent annual return on gross block (originalcost of
property with periodic additions by the Tariff Commission), 6.60 crores
from depreciation (calculatedat an annual rate of approximately5 per-
cent on gross block under Tariff Commissionallowances),1.05 crores from
the annual interest allowance on working capital, and I crore from five
years profits from the Kulti foundries.

(c) New Capital Requirements

4o. This leaves a balance to be raised of 35.93 crores of rupees

(U.S. equivalent'4375P453,000).It is proposed that the capital require-
ments be raised by the following means:

0quivalent
Crores of .illionsof
New Capital Requirements Rupees U.S. Dollars Percent

IBRD Loan (to cover foreign

currencyconstructionneeds) 15.00 $ 31,50 42 %

Government of India
Additional Loan 1/ 5.40 11.34 15
Accumulated Interestduring
construction 1.25 2.62 3
Housing Loan .30 .63 1

Advances from 3qualization Fund 10.00 21.00 28

Domestic Bank Borrowings 1.78 3.74 5

Sale of i4arketable Securities

(Ordinary shares of IISCO now
held in treasury) 2.20 4.62 6

Total 35.93 $ 75.45 100

41. In summary, of the total amount of cash required for all purposes
amounting to 55.14 crores of rupees, approximately27 percent is to be
provided by the IBRD loan, 31 percent by the Government of India in the
form of an additionalloan, accumulatinginterestduring construction,and
advances from the Equalization Fund, 3 percent from domestic bank borrowings,
4 percent from sale of marketable securities,and 35 percent from gross

1/ The Government of India has already agreed to advance the Company 5

crores, of which 2.40 crores has so far been drawn, and under the Agree-
ment with the Company will increase the amount to be drawn upon to 7.90
crores.
 -13-

earnings. Of the 35.93 croresof new capitalneeded,appro4imately 42

percentis to be providedby the IBRDloan,47 percentby the Government
of India in the form of an additional loan,accumulating interestduring
construction, and advancesfrom the Equalization Fund, 5 percent from
domesticbank borrowings, and 6 percent from the sale of marketable
securities,

(d) Description of New Capital

42. IISC0has requested that a loan be made by the Bank to cover the
foreign exchange costs of the projectincludinginterestand commitment
charge during construction. The proposed IBRD loan,estimatedto amount
to the equivalentof U.S. 3l,5OO,000(includinginterestand commitment
chargeduringconstruction), has been assumedto be for a term of fifteen
years, repayable in semi-annual payments starting in the year 1959, with
level payments in the years 1959, 1960 and 1961 equally reduced, along
with a proportionate reduction in p.iAncipal repayment on the Government
of India loan, to permit accelerated retirementof the Companytssterling
loan, and with level payments over the remaining years 1962-1967 inclusive
increased by the amount of principal deferment. This gives an
average life of 11.17 years and retires 93 percent of the issue by maturivr.
For the purposes of this report, the interest rate has been assumed at
4 3/14 percentper annum, including the one percent statutory commission,
an.dthe commitmentcharge3/4 of one percent. Paymentof principal,
interest,and otherchargeson the loan is to be guaranteedby the Govern-
ment of India.

43. The presentcapitalstructureof IISCOalreadycontainsa series

of chargesupon Companyassets. The followingtablesets forthIISCO's
capitalstructureas of December31, 1952 (the startof the construction
period),as of December31, 1957 (the completionof the constructionperiod
and the approximttepeak of detb obligations),
as of December31, 1961
(afterretirementof the sterlingloan), and as of December31, 1967 (after
retirementof the IBRDand Governmentof Indialoans).
 Estimated Capital Structure
of Indian Iron and Steel Company, Ltd.
at Various Periods

12/31/67
12/31/52 (a) 12/31/57 12/31/61 After IBRD
Beginning of After After Sterling & Govt.Loan
Construction Construction Loan Retirement Retirement

Crores % Crores % Crores % Crores %

Deb

Sterling Loan 1.47(b) 9 1.22 2 -

15-yr IBiADLoan - 15,00 30 11.03 24 -
Domestic Bank
borrowings 1.19 8 1.78 4 -

Government of India 6
Loan 2.50 7.90) 6.26
Accumulated int. - 1.25)
Housing Loan - .26 __ .35 .17

Total Govt. 2.50 16 9.41 19 6.61 15 .17

Total Debt 5.16 33 27.41 55 17.64 39 .17

Advance from
EqualizationFund - 10.00 20 10.00 22 10.00 26

Capital Stock

5% Cumulative
Preference (RslOO) 2.70 2.70 2.70 2.70
Ordinary Shares (RslO) 5.18 5.18 5.18 5.18

Total capital stock 7.88 50 7.88 16 7.88 17 7.88 21

Surplus .12 .73 5.65 15.89

General Reserves 2.49 3.59 4.52 4.52

Total surplus and

general reserves 2.61 17 4.32 9 10.17 22 20.41 53

Total cap.stk.,surp.,
gen.res.,&
Bqualiz.Fund 10.49 67 22.20 45 26.05 61 38.29 100

Total Capitalization 15.65 100 49.61 100 15.69 100 38.46 100

a) Estimatebased on Sept. 30, 1952 consolidatedbalance sheet excluding

inter-companyitems and allowingfor final quarter adjustments.
b) After anticipationof July 1, 1953 sinking fund.
 -15-

44. The Company's 1st Mortgage4% Debenturesdue 1966, referred to

in the capital structure as the Sterling Loan, carried a first mortgage
and first floater on IISCO1s original assets before merger with SCOB.
NTowoutstanding in the amount of 1.h7 crores, the sinking fund schedule
called for an annual retirement of approximately.05 crore over the
thirteen years 1953-1965 and a final payment of around .82 crore in 1966.

45. In the interests of corporate simplification,the first mortgage

bondholderswere offered and they have accepted an increase in the interest
rate to that assumed on the proposed IBRD loan (4 3/4%) and the option of
being repaid at par on December 31, 1961 in exchangefor granting the
proposed IBRD loan, in effect, a pari passu mortgage and floater position
on the combined assets of IISCO and SCOB. The InternationalBank and the
Governmentof India enabled this offer to be made by agreeing to adjust
the amortizationschedules on their own respectiveloans. The revised
redemptionschedule on the Sterling Loan now calls for the retirementof
approximately.05 crore annually over the eight years 1953-1960 and the
balance of 1.07 crores in 1961, on the assumptionthat all debenture
holderswill exercise their option.

46. The Governmentof India's consolidatedloan (2.50 crores now

outstandingand to be increased to 7.90 crores exclusiveof accumulated
interest) is to carry mortgage rights, ranking below those of the Sterling
Loan and the IBRD Loan but pari passu with the Imperial Bank debentures
(domesticbank borrowings). The Governmentloan is to carry compound
interest at the same rate per annum as on the loan from the International
Bank, and these interest charges will be allowed to accumulateduring the
constructionperiod. The loan is to be repayable by equal annual instal-
ments spread over the same period as on the loan from the International
Bank (1959-1967inclusive as scheduled on the cash flow sheet attached)
with a proportionatereduction in the years 1959, 1960, and 1961 to allo-w
for the acceleratedretirement of the Sterling Loan in 1961, with the
reduction to be added equally over the level amortizationscheduleof the
remaining six years.

47. The Company has a program to provide additionalhousing and

townsitefacilities along with the expandedoperation. The Company has
various electives under the proposed Housing Act, but expects to borrow
50 percent of the cost of these added facilitiesdirectly from Government.
Of the total cost of the housing project of 1 crore, 60 percent is now
scheduled to be built during the five-year construction period and the
remaining 40 percent over 1957 and 1958. This would mean borrowing an
additional .30 crore during construction and .20 crore afterwards. Each
loan is scheduled to have a 15-year maturity, carry 4 3/4 percent interest
rate, and will be amortized over each individual 15-year period.

48. The Companyts domestic bank borrowingsat the end of 1952 are
expected to total 1.19 crores in order to maintain an adequate cash
position, About .29 crore of this amount is expectedto be repaid in
1953 and the balance .90 crore in 1954. Assuming the sale of marketable
securities as scheduled on the cash flow sheet IISCO will not have to go
to the banks for working capital until 1956 when 1.78 crores will be
required. This in turn is scheduled for repayment in 1958. Under the
Loan Agreement the Company is permitted to borrow up to 5 crores against
inventories.
 -16-

49. From its holdings of SCOB shares IISCO will receive approx-
imately 880,000 shares of its own ordinary stock in the merger.
Previously these had been eliminated in a shrinkage of the capital
structure,but under the Indian CompaniesAct it was found that the shares
could not be cancelled. Through the device of an intermediarycompany
it is planned to market these shares over the next three years raising an
estimated 2.2 crores over the period, thereby reducing the amount of
borrowing for working capital previously considered needed.

50. The remaining amount to be raised, 10 crores of rupees, is to

come from the Government'sEqualizationFund. This advance has been
treated as equity in projecting the pro-forma capitalizationof the
Company. It provides a further cushion under the IBRD loan as well as
relief to the Company from a too heavy maturity schedule through 1967.
This Advance, as provided in the Agreement between the Governmentof India
and The Indian Iron and Steel Company, Ltd., will not carry interest
during the period of constructionand has no maturity date. If interest
and/or repayment of principal is required thereafter,to the extent these
are not met by sale of share capital, they are to be met only to the
extent that the Government of India on the advice of the Tariff Commission
permits additionalallowancesover and above the normal retention prices.
If the Advance is not paid by Mlarch 31, 1969, the Government of India shall
decide, on the advice of the Tariff Commission, whether the balance shall
be paid by raising of capital or through additionalallowances.

51. The Government of India also agrees- (a) to render such further
financial assistance on such terms as may be mutually agreed in order to
enable the Company to complete its expansion program; and (b) to maintain
the Company in sound operating condition; provided such sums as may be
necessary cannot be raised from private sources,

(e) Government'sPositionin Steel Industry

52. The EqualizationFund in itself is an essential feature of the

Government'ssystem of price control for steel which requires that all
producers sell at a uniform consumerprice. Steel producers in turn are
allowed "retentionprices" which are based on operating and various over-
head costs allowed by the Governmentin addition to the fixed return on
gross block, The differencebetween the retention and the consumerprice
is paid into the EqualizationFut±dand is used to subsidize higher cost
producers and imports of steel so that such steel can also be sold at the
uniform consumerprice. To generate the funds needed to finance advances
to the steel companies for further plant expansion and to create funds for
future expansion, the Tariff Commission has uniformly increased consumer
prices by Rs. 100 (in two Rs. 50 steps) per ton since June 30, 1952.
Additionalfunds estimatedat 9.00 to 10.20 crores of rupees per year will
accrue to the EqualizationFund on the basis of l,020,000 tons of finished
steel production.
 -17-

53. The Government dominates the domestic demand for steel, since
it now consumes about 50 percent of the available supplies. Also, through
the Tariff Commission, the Government regulates retention and consumer
prices, and through these and other devices conurols the profits of the
steel companies. During the period of controls, therefore, the Government
has the responsibility of adjusting profits and other allowances as needed
from time to time to permit proper service of the IBRD loan and to maintain
the Company in a sound financial and physical condition. The Government
alreacy has advised that they have fixed the retention price for three
years on recommendation of the Tariff Commission, and will request that
the Tariff Commissioninclude some form of productionincentivesin -ts
determinationof retention price. Projected earnings,balance shieetdata,
and the cash flow, as calculatedfor the years 1953 through 1967, indicate
that the IBRD loan will be adequatelyprotected.

(f) Pro-Forma Interest Coverage

54. Dcclusiveof any interest on the advance from the Equalization

Fund (which would be provided by a separateallowance)interest coverage
-would work out on a pro-forma basis as follows:

Interest Requirements
Balance Avail. Interest Requirements Times Earned
Year for Interest Sterling Govt. and Sterling
Period of after Deprec. and Other and
Construction and Taxes IBrD Loan Loans Total TBRDLoan Total
(in Crores of Pupees) -

1953 1.37 .22 .16 .38 6.2 3.7

1954 1.63 .34 .16 .50 4.8 3.3
1955 1.73 .55 .19 .74 3.1 2.3
1956 1.88 .68 .47 1.15 2.8 1.6
1957 3-00 .76 .54 1.30 4.o 2.3

Remaining Life
of IBRD Loan

1958 3.68 .77 .51 1.28 4.8 2.9

1959 3.76 .76 .44 1.20 5.0 3.1
1960 3.75 .70 .4o 1.10 5.3 3.4
1961 3.71 .63 .35 .98 5.9 3.8
1962 3.73 .50 .31 ..81 7.5 4.6
1963 3.68 .43 .25 .68 8.6 5.4
1964 3.62 .34 .20 .54 10.7 6.7
1965 3.65 .26 .15 .41 14.0 8.9
1966 3.60 .17 .10 .27 21.2 13.3
1967 3.54 .07 .05 .12 50.6 29.5
 - 18 -

(g) Funds Available for Debt Retirement

55. Funds available for debt retirement,repayment schedules,annual

net excess cash, and cash accumulationin relation to the amount of the
Sterling and I3BM loans outstandingare set forth below:

Funds Available for Debt Retirement

(in Crores of Rupees)

Annual
Excess of Sterling
Cash Inflow Repayment Schedules Annual & I9RD
Years Over Oatgo Govt. Loan Overdrefts net Cash Loans
Ended Before Debt Sterl. 1BRD & Accum. & Housing Excess Accumu- Amt.out-
Dec. 31 Retirement Loan Loan Interest Loan Total Cash lation standing

1952 - - - - - - .59 1.47

Construce
Period
1953 .34 .05 - - .-
29 .34 - .59 2.87
1954 1.45 .05 - - .90 .95 .50 1.09 6.05
1955 .68 .05 - - .01 .o6 .62 1.71 11.58
1956 -1.o6 .05 - - .01 .06 -1.12 .59 14.21
1957 .14 .05 - - .02 .07 .o7 .66 16.22
Remaining
Life of
I3RD Loan
1958 2.06 .05 - - 1.80 1.85 .21 .87 16.17
1959 3.55 .05 1.26 .96 .03 2.30 1.25 2.12 14.91
1960 3.72 ,05 1.32 .96 .03 2.36 1.36 3.48 13.45
1961 3.79 1.07 1.39 .97 .03 3.46 .33 3.81 11.03
1962 4.03 - 1.63 1.04 .03 2.70 1.33 5.14 9.4o
1963 4.09 - 1.71 1.04 .03 2.78 1.31 6.45 7.69
1964 4.16 - 1.79 1.04 .03 2.86 1.30 7.75 5.90
1965 4.37 - 1.87 1.04 .03 2.94 1.43 9.18 4.03
1966 4.44 - 1.97 1.04 .03 3.04 1.40 10.58 2.06
1967 4.51 - 2.06 1.o6 .03 3.15 1.36 11.94 _

40.27 1.47 15.00 9.15 3.30 28.92 11.35

56. irearlyall of the excess cash generation, as the precedine table

shows, falls within the ten years 1958-1967, the years in which the contri-
bution of the added facilitiesis fully reflected. Yet excess cash devel-
oped after debt repayments over this ten-year period totals 11.28 crores
of rupees, as only .07 crore will have been developed up to the end of 1957
due to the heavy outgo. This is eouivalentto about 75 percent of the pro-
posed ITRD loan. In other words, the cash flow sheet indicates that over the
one year of grace and tine-year amortizationperiod total available cash Vill
be equivalent to 1 3/4 times the principal amount of the loan, and by 1964
the Companyls cash accumulation in itself should be sufficient to take care
of the remainder of the loan even if no further escess cash developed.
 -19-

(h) Pro-FormaAsset Protectionof IBRD Loan

57. The IBRD loan would also appear to be well protected in terms
of tangible and net current assets based on projected balance sheets as
of December 31, 1957 (the completionof the constructionperiod) and as
of December 31, 1961 (when the IBRD loan is the only first mortgage issue
still outstanding). This is set forth belov:

As of December 31
1957 1961
(Croresof Rupees)

Gross property (cost) 59.28 60.98

Less,High Courtreduction
and depreciation 16.75 28.40

Net property 42.53 32.58

Less,reserveson spec.accounts 1.85 1.85

Revisednet property 40.68 30.73

Net currentassets 9.66 14.9

Net tangibleassets 50.34 45.69

SterlingLoan 1.22 -
IBRD Loan 15.00 11.03

Totalprior liens 16.22 11.03

Per Core of Debt
Net currentassets .60 1.36
Tangibleassets 3.10 4.L4

58. cKpressedin dollarsfor each dollarof firstmortgagedebt

outstanding at the end of 1957,the projectedbalancesheetindicates60
centsof net current assetsand $3.10of tangibleassets. At the end of
1961 for eachdollar of the ITBRDloan then outstanding,
the projected
balancesheetindicates$1.36 )f net currentassetsand $4.14of total
net tangibleassets.

XIII. Justification
of the Project

59. Demandfor steelin Indiais considerably largerthan the

productivecapacityof India's steelproducersand necessitates yearlyan
increasingexpenditure in foreignexchangeto meet the most urgentsteel
requirements. This is shownby the CIF cost of steelimportsduringthe
past three years in the table Which follows:
 -20-

AnnualCost of Steel Imports

(Equiv,1,1illions
of U.S.Dollars)

Year 1949 1950 1951

Cost 18.4 23.3 33.2

60. Had the IISCO-SCOB

and Tatasexpansionprogramsbeencompleted
in 1951,importswould havebeen the equivalentof aboutU.S.$8.0 million
insteadof U.S. $33.2million,or a savingof approximatelythe equivalent
of U.S.$25.o millionin foreignexchange. Aboutone-thirdof the
savingswouldhave comefrom the IISCO-SCOBprojectand the remainderfrom
Tatas,mainlybecauseTatas'projectincludesa tube mill.
61. Indiais rich in the materialsneededto make steel. The market
also has becomelargeenoughto justifyplantsof economicsizelvhich, when
combinedwith relativelycheaplabor,givesextremelyfavorablecostsof
production. It becomesvery important,therefore,that Indiamake use of
thesenaturaladvantages to producemore domesticsteel,at considerable
savingto the consumer.

62. The II$CO-SCOBprojectwill make availableat least400,000 tons

per year of foundryiron for the use of India'snumerousfoundriesand at
least250,000tons per year of tin bar and billetsfor the "Re-rollers".

63. Failureto increasethe domesticsupplyof steelwill seriously

jeopardize carefully considered Government plans:to increase production of
food grains; to expand agriculture, engineering industries, transportation
and public utilities; and to relieve the housing shortage.

XIV. Conclusions

1. The project is technically feasible and offers the most rapid

and leastcostlymeansof relievingIndia'simmediateshortages
of iron and steel.

2. The proposedmeans of financingare considered

adequatefor the
project.

3. The projectis well engineeredand couldbe startedpromptly.

4. The projectwouldbe self-supporting

basedon presentratesof
returnallowedby the Government.

5. The projectis suitableas the basisfor a loan in foreign

exchangeequivalentto aboutU.S. 031.5million.

December41 1952
 SCHEDULES ATTACHED

I. Capital Expenditure Chart, 1953-1957

II. Source and Application of Funds (Cash Flow Sheet),

Years 1953-1967 inclusive,

III. Calculation of IISCOIs Gross Block and Estimate of Gross

Income Based on Return Expected from Tariff Commission.

IV. Estimate of profits, 1953-1958 inclusive.

V. Estimate of profits, 1959-1967 inclusive.

VI. Pro-formaBalance Sheets as of December 31, 1952, 1957,

1961 and 1967.

VII. ConsolidatedBalance Sheet of Merged Companies (intercompany

items eliminated) as of September 30, 1952 (unaudited),

VIII. Disbursementand AmortizationSchedule for Proposed IB3D

Loan.

IX. GovernmentLoan Drawings and Advances from Equalization

F'und.

XI GovernmentLoan Repayment Schedule.

XI. Drawings and Repayment of GovernmentHousing Loan,

XII. Sunmary of Past Earnings and Balance Sheets of The Indian

Iron & Steel Company, Limited.

XIII. Summary of Past Earnings and Balance Sheets of The Steel

Corporation of Bengal, Limited.
 Schedule I

C&PITALEXPNITURE CHART
(In Lakhs of Rupees)

1953 1954 1S 1956 19S7 Total 19$8 95

Projected Expansion

Foreign Currency 130 300 520 210 140 1,300

Indian Currency 160 450 730 i184 1.874

290 750 1,250 560 324 3,174

Current Extensions

IIsco 80

sCOB 250 -30

620 750 1,250 560 324 3,504

Minor Capital Works 50 50 50 50 50 250 50 50

Housing and Town 12 12 12 _ 12 12 60 20 20

682 812 1,312 622 386 3,814 70 70

 THE INDIAN IRON AND STZEL COMPANY.Ltd. SCHEDULEII
SOURCEANDAkPLICATION OF FUNDS, 1953 - 1967
(In crores of rupees)

SOURCE OF FUNDS 1953 1954 1955 1956 1957 1958 1959 1960 i161 1962 1963 1964 1965 1966 1967
Free cash& Govts.at beginning .59 .59 1.09 1.71 .59 .66 .87 2.12 3.48 3.81 5.14 6.45 7.75 9.18 10.58
Gross Income
8/'O
on block 1.51 1.86 1.86 1.86 3.47 4.52 4.70 4.70 4.70 4.84 4.84 4.84 4.98 L.98 4.98
Depreciation at 5o .95 1.16 1.16 1.16 2.17 2.83 2.94 2.94 2.94 3.02 3.02 3.02 3.10 3.10 3.10
Intereston workingcapital .20 .20 .20 .20 .25 .30 .30 -30 . .3
.30 oj .30 -30 .30
Totalgross income 2.66 3.22 3.22 3.22 5.89 7.65 7.94 7.94 7.94 8.16 8.16 8.16 8.38 8.38 8.38
Profiton Kultifoundries .20 .20 .20 .20 .20 .20 .20 -25 .25 .25 -25 .25 .25 .25 .25
Total income 2.86 3.42 3.42 3.42 6.09 7.85 8.14 8.19 8.19 8.41 8.41 8.41 8.63 8.63 8.63
Sale of Marketable
Securities .74 .73 .73 - - - - - - - - -

New Money
For capital expenditures
Intll Bank for Recon. & Dev.
Drawdownof principal 1.30 3.00 5.20 2.10 1.40 -
Advance of int. during const.1 _.21 .38 .8 .66 - - - - - - - - _
Total from I.B.R.D. 1.45 3.23 5.58 2.68 2.026-
Government of India
Drawrdownof loan - - 5.40 - - - - - - - - - - - -
Int.accum.on loan .12 .13 .18 .40 .42 - - - - - -
Housing loan .06 .06 .06 .06 .06 .10 .10 - -
Equalization Fund(10crore)4 1.4 - , - _ _ _ - _ - - _ -
Total 4.28 4.69 Z.04 _46 .48 .10 .10 _ - _ - _
Total for capital expend.. 5.73 7.92 12.62 3.14 2.54 .10 .10 -

For working canital

Government of India - - - - - - - - - - - - -
Imperial Bankof India - - - 1.78 - - - - - - - - -
National Bank of India, Ltd. - - - - _ _ _ - - - - _
Total for working capital - _ - 1.78_ _ _ -

Total new money 5.73 7.92 12.62 4.92 2.a4 .54 .10 _ - - - - _ - .-

Total 9.92 12.6617.8610.05 9.22 8.61 9.11 _ 1 UL._212.2213.51 4.8 6 1 17.81 19.21
 THE INDIAN IRON AND STEEL COMPANY. Ltd.
SOURCE A'D APPLICATIONOF Fl?DS, 1953 - 1967 SCHEDULE II (Cont)
(In crores of rupees)
APPLICATION OF FUNDS 1953 1954 1955 1956 1957 1958 1959 1960 1961 1962 1963 1964 1965 1966 1967
Plant and 7hui_ment
4roJectedExpansion
Foreign currency (13.00) 1.30 3.00 5.2 2.10
01.40
Domestic currency (18.74) 1.60 L -0 Z.-0 3.50 1.84 _ - - _ - -

Total projected 2.90 7.50 12.50 5.60 3.24 - - -

Minor capital works .50 .50 .50 .50 .50 *50 .50 .50 *50 .50 .50 .50 .50 .50 .50
Housing and town .12 .12 .12 .12 .12 .20 .20 - - - - - -
Current extensions 0 - .- -- - - - -
Total plant and equipment 6.82 8.12 13.12 6.22 3.86 .70 .70 .50 .50 .50 .50 .50 .50 .50 .50
Interest
1st Mort. Deben. (Sterling Loan) .06 .o6 .o6 .o6 .o6 .o6 .o6 .o6 .o6 - - - - - -
Int'l Bank (incl. commitmentfees) .16 .28 .49 .62 .70 .71 .70 .64 .57 .50 .43 .34 .26 .17 .07
Government of India
Loan .12 .13 .18 .40 .42 .43 .42 .38
.33 .29 .2h .19 .14 .09 .04
Housing Loan - .01 .01 .01 .01 .02 .02
.02 .02 .02 .01 .01 .01 .01 .01
EqualizationFund - - - - - - Payable t"ereafter only to extent that a special allow-
ance is made in the retention price.
Bank Overdrafts .04 .02 - .o6 _.1i .o6 - - - -=- - -
Total Interest .38 .50 .74 1.15 1.30 1.28 1.20 1.10 .98 .81 .68 .54 .41 .27 .12
Labor profit sharing bonus .15 *15 *15 .15 .25 .30 .30 .30 .30 .30 .30 .30 .30 .30 .30
M4anagingAgents & Dir. Remuneration .15 .17 .15 .10 .26 .37 .40 .42 .43 .46 .48 .49 ,52 .54 .56
Taxes .54 .63 .53 .38 .92 1.34 1.44 1.50 1.54 1.66 1.71 1.77 1.88 1.93 1.99
Dividends - Preferenceat 5% .13 .13 .13 .13 .13 .13 .13 .13 .13 .13 .13 .13 .13 .13 .13
- Ordinary at 10% .52 .52.52 . 2 .55.2 .52 52 .2.-. 2.2.
.S.2. .. 2
Total .65 .65 .65 .65 .65 .65 .65 .65 .65 .65 .65 .65 .65 .65 .65
Inventories (4.70) .30 .40 .75 .75 1.25 1.25
Redemptions
1st Mort. Deben. (SterlingLoan) .05 .05 .05 .05 .05 .05 .05 .05 1.07 - -

InternationalBank Loan - - - - - - 1.26 1.32 1.39 i.6-31.71 1.79 1.87 1.97 2.o6
Government- Loan - - - - - - .96 .96 .97 1.04 i.o4 1.0 i.o4 1.04 1.01
- Housing Loan (a) - - .01 .01 .02 .02 .03 .03 .03 .03 .03 .03 .03 .03 603
- Er,ualization Fund. - - - - - Payable thereafter only to extent tb1t a special allowV.-
ance is made in the retention pric-e or from proceeds of future ecuity sales.
Overdrafts .29 .90 _ - 1.78 - - _ _ _ _ _
Total redemptions .34 .95 .06 .06.07 1.85 2.'3073 Y4& 2.70 2.78 2.86 2.9 3o4 3.,
Free cash Governments at end .59
1.0 1 .59 .66 . 2.12 3.48 3.81 2.18 10.58ll.94
Total 9.9212.66 10.05 9.22 8.61 9.11J 11.67 12.22 13.55 4.86 16.38 1228119.21
(a) Each loan amortized over 15-year period from date of issue.
 CALCULATIONOF GROSS ELOCK AND ESTIMATE OF GROSS INCOME ON IRON Schedule III
AND STEEL BASED ON RETURN EXPECTPDFRCM TIU TARIFF CO0'IIAISSION
(In Lakhs of Rupees)
8'p on Block Deprec. Interest on Gross Income
at Charae at 5% WlorkingCaDital Total Year
Current Block
IISCO-SCOBat 31.3.52 895
Kulti as assessed by
Tariff Commission 219 1,114

SCOB at 31.12.51 780

At charge end 1952 1,894 151 95 20 266 1953
ComPleted Installations
1953 Current Extensions -
IISCO 80
SCOB 3U° 430
At charge end 1953 2,324 186 116 20 322 1954
At charge end 1954 2,324 186 116 20 322 1955
At charge end j9a 2,324 186 116 20 322 1956
1956 - Minor capital works
1953 62
1954 62
1955 62
1956 62
lat blast furnace 1.770
At charge end of 6 4,342 347 217 25 589 1957
.122- 2nd blast furnace 1,100
1st Kulti blast furnace 150
Minor capital works 62
At rharge end of 1957 5,654 452 283 30 765 1958
195 - 2nd Kulti blast furnace 150
Minor capital works 70
At chaxge end of 1928 5,874 470 294 30 794
 Schedule IV
ESTIMATE OF PROFITS
(In Lakhs of Rs.)

1963 1954 1955 1956 22 1958

Gross Income on Iron and Steel 266 322 322 322 589 765

Kulti Foundries 20 20 20 20 20 20

286 342 342 2 02 785

Depreciation 95 116 116 116 217 283

Loan Interest
World Bank (16) (28) (49) (62) (70) 71
Government- Straight Loan (12) (13) (18) (40) (42) 43
- Housing Loan - 1 1 1 1 2

Intereston Bank Overdraft 4 2 - 6 11 6

Debenture Interest 6 6 6 6 6 6

Labor Bonus 15 15 15 15 25 30

Managing Agency & Directors Fees 15 17 15 10 26 37

Taxation S4 _ 3 38 92 134

2 261 2 294 90 612

Profit 69 81 69 48 119 173

 SCHEUL$ V
PROPIT :0,STIMATC
(In Lakhs of Rse. )

1959 1960 1961 1962 1 1964 1965 1966 1967

Block 5,874 5,874 5,874 6,o44 6,044 6,044 6,194 6,194 6,194

Gross Return on Block 794 794 794 816 816 816 838 838 838

Kulti 20 2-5 25 25 25 _25 ,25 25 - 25

814 819 819 841 841 841 863 863 863

Depreciation 294 294 294 302 302 302 310 310 310

Loan Interest
IWorld 3ank 70 64 , 50 43 54 26 17 7
Government - Straight Loan 42 58 33 29 24 19 14 9 4
- Housing Loan 2 2 2 2 1 1 1 1 1

Debenture Interest 6 6 6 - - - - - -

Labor Bonus 30 30 30 30 30 30 30 30 30

Managing Agency & Directors Fees 40 42 43 46 48 49 52 54 56

Taxation 144 150 154 166 7 177 188 222 199

628 § jil bg 6ig 612 621 614 60O?

Profit 186 ZO 200 216 229 249 256

 PRO-FORA BALANCE SHMTS OF IISCO D MI YI.
As of December 31
(In Lakhs of Rupees)
ASSETS 1952 1957 1961 1967
ProDerty AcSount
Cost 2,018 5.928 6,098 6,398
Less, High Court reduction _137137 137 137
1,881 5,791 5.961 6,261
Less, depreciation 878 1.N28 2203 4.532
1,003 4,253 3,258 1,722
Capital works in progress 129 - -
Net Property Accounts 1,132 4,253 3,258 1,722
gurrent Assets
Cash 59 66 381 1194
Investmentsat realizablevalue 220 - -

Inventories,etc, 600 945 1,070 1,070

Net debtors - 45 44
879 1,011 1,496 t304
less, net creditors 103 45 - _
Net current assets 776 966 1,49. 2005
TOTAL ASSETS
LIABILITIES
Debt
Sterling loan 147 122 -
IBAD loan - 1,500 1,10
Government of India - Loan 250 915 620
- Housing Loan - 26 35 17
Domesticbank overdrafts 119 178 -
Total debt 516 2,741 1,764 17
Advances from EqualizationFund - 1,000 1,000 1,000
Reserves - on speeial accounts 185 185 185 185
- General 249 359 452 452
- Profits on investments 110 - - -
Debenture sinking fund 48 73 - -
Canital Stock - Preference (Rs. 100) 270 270 270 270
- Ordinary (Rs. 10)318 518 51
Total Caoital Stockc 788 788 788 788
Surplus (profitand loss account) 12 73 S Ia
TOTAL LUABILITIES 1,08 5.219 4 1
 SCHEDULE VII
IISCO-SCOB

ADproximate ConsolidatedBalance Sheet as of September 30, 1952

(On merger basis, intercompanyitems eliminated)

(It Lakhs of Rupees)

ASSETS LIABILITIES

Debt
Fixed capital expenditure at First mortgage Debentures 153
depreciated cost, less less bought in for redemption
High Court reductions 1,023 at July 1, 1953 6 147
Government of India loan 250
Capital works in progress 121 Imperial Bank of India overdraft 25

Free investmentsat cost Total debt 422

Government securities 60
Shares 110 Reserves
On special accounts 185
General 241
Current Assets Total 426
Cash 59
Stocks and stores i9 Debeature sinking fund 47

Total current assets 654 Capital stock. Preference 270

Less, net creditors and - Ordinary S18
credit balances X Total capital stock 788

Net current assets 478 Profit and loss account 109

Total Assets 1,792 Total Liabilities 1,792

 VIII
SCIiEDULE

Proposed Rs. 150,000,000 IP.:T) Loan 4 3/4%, 1953-1967

U n L . ees)

Disbursed & Total

Year Disbursements Outstanding Undisbursed Principa1 Interest Commitment Char es

1953 7,500,000 7,5O0,OOO142,500,000 - 712,500 534,375712,500

1953 7,500,000 15,000,000135,000,000 - 862,500 506,250 862,500
1954 17,310,000 32,310,000 117,690,000 - 1,208,701 441,3381,208,701
1954 177310,i000 49,620,000 100,380,000 - 1,554,900 376,425 1,554,9o0
1955 30,000,000 79,620,00070,380,000 - 2,154,900 263,9252,154,900
1255 30,000,000109,620,00040,380,000 - 2,75h,900 151,4252,754,9OO
1956 12,120,000121,740,00028,260,000 4 2,997,300 105,9752,997,300
1956 12,120,000133,860,000 6,140o,0o0 _ 3,239,700 60,5253,239,700
1957 8,070,000 141,930,000 8,070,000 - 3,401,101 30,2633,401,101
1957 8,070,000150,000,000 - 3,562,500 3,562,500
1958 150,000,000 - 3,562,500 3,562,500
1958 150,000,000 - 3,562,500 3,562,500
1959 150,000,000 6,242,8513,562,500 9,805,351
1959 143,757,149 6,390,4703,414,232 9;804,702
1960 137J,366,679 6,542,8513,262,458 9,805,309
1960 130,823,828 6,695,2313,107,065 9,802,296
1961 124,128,597 6,857,1362,948,054 9,805,190
1961 117,271,461 7,019,0412,785,197 9,804,238
1962 110,252,420 8,047,6112,618,494 io,666,1o5
1962 102,204,809 8,238,0872,427,364 10,665,451
1963 93,966,722 8,433,3252,231,709 10,665,034
1963 85,533,397 8,638,0872,031,418 10,669,505
1964 76,895,310 8,842,848 1,826,263 10,669,111
1964 68,052,462 9,052,372 1,616,245 10,668,617
1965 59,000,090 9,266,657 1,401,252 10,667,o09
1965 49,733,433 9,485,705 1,181,169 lo,666,874
1966 40,247,728 9,709,514 955,883 10,665,397
1966 30,538,214 9,942,847 725,282 10,668,129
1967 20,595,367 10,176,180 489,139 10,665,319
1967 10,419,187 10,419,187247,455 10,666,642
 SCHEDULEIX

GOVERIMENT
LOAN DRAWINGSANDADVANCES FROMEQUALIZATIONFUND
(In Lakhs of Rupees)

Year Net Loan Advance Loan Running Interest Annual

Loan Advance Drawings Drawines at Interest at 4 3/14% Interest

1953 790 1,000 250 330 250 5.9

80 255.9 6.1 12.0 Accumulated

1954 225 262.0 6.2

225 268.2 6.4 12.6 do

1955 225 140 274.6 6.5

315 506.1 12.0 18.5 do

1956 833.1 19.8

852.9 20.3 40.1 do

1957 873.2 20.7

893.9 21.2 41.9 do
125.1

1958 915.1 21.7

915.1 21.7 43.4 Paid in cash

1959 6 915.1

790 1,000
 GOVEYNIT LOANREPAYMENT SCHMfL1JlEX
Commencing at Rs. 96 per annum, 1st Repayment 30.6.59
(First three years to be reduced by 17 Lakhs spread evenly over the poriod to take care of Government's
proportion of meeting advanced payment of Sterling loan in 1961*)
Principal interest
OQtstanding Average at 4 31/4 Renayment
915 ) 891 42.3 1959 96
30. ~~~~~~~~867)
1960 96
),i2tg 819 ) 795 37.8
10. . 771 ) 1961 97
723 ) 699 33.2 1962 104
675 )
1963 104
31.12.61 626 14.9 )
Balance of 17 Lakhs to be repaid equally over 6 yrs. at Rs.104 per annum ) 28.5 1964 1o4
30.6.62 574 13.6 )
1965 104
31.12.62 522 ) 496 23.6
30,6.63 470.) 1966 104
31.12.63 418 ) 392 18.6 1967 106
30.6.64 366 )
915
31.12.64 314 ) 288 13.7
30.6.65 262 )
31.12.65 210 ) 184 8.7
30.6.66 158 )

31.12.66 106 ) 79.5 3.8

30.6.67 53 )

31.12,67 _
* Of advanced repayment of Sterling Loan in 1961 of 1.07 crores, .56 croreis to comefrom earnings,
.34 crorefrom reductionof IBRD principal payments over 3 years 1959-1961and .17 crore from
reductionf governmentloanprincipalpaymentsover 1959-1961.
 SCH2IDULE
XI.
HOUSINGLOANIOF Rs.*;0
GOVBB1':bNT LAKHS

ANIXUAL
DRAWINIGS
REPAYABLEOVER1S YEARS

Drawing Repayment Running at Interest Int. at 4 3f4l

1953 6 _ 6 .28

1954 6 .4 11.6 .55

1955 6 .8 16.8 .80
1956 6 1.2 21.6 1.03
1957 6 1.6 26.4 1.26
1958 10 2.0 34.4 1.64
1959 10 2.7 41.7 1.98

1960 _ 3.3 38.4 1.83

1961 3.3 35.1 1.67

1962 3.3 31.8 1.52
1963 3.3 28.5 1.35
1964 3.3 25.2 1.20
1965 3.4 21.8 1.04
1966 3.3 18.5 .88
1967 3.3 15.2 .73
1968 3.3 11.9 .57
 SCIEDULEXII

LII1iTED
THE INDIAN IRON & STEEL COMPCANY,

Summary of Earnings
(Crores of Indian Rupees)

Year Ended Total Depre- Net Income Interest Dividends Additions to

31 Revenue ciation after Taxes Paid
±.iarch Paid* Surplus and
Available for Reserves
Interest

1947 4.33 .20 .27 .07 .10 .10

1948 8.22 .30 .45 .10 .19 .16
1949 9.29 ,30 .54 .11 .26 .17
1950 13.08 .33 go
.90 .13 .26 .51**
1951 10.65 .40 .81** .17 .28 .36 fi
1952 11.89 .40 .86 *'* .12 .33 .41**
31
SummaryBalanceSheetsas of hi.arch
(Croresof IndianEupees)

19b1 1946 1950 1951 1952

ASSETS:

Current Assets 2.66 3.43 4.68 4.68 6.22

Fixed Assets 5.53 6.06 10.54 10.91 11.23
less: depreciation 1.23 2.52 3.09 3.47 3.86
NetFixedAssets 30 _373 7.45 7744 7.37
Other Assets 1.35 1.33 1.23 1.19 1.20

TotalAssets 8.31 8.30 13.36 13.31 14.79

LIABILITIES:

CurrentLiabilities .65 1.36 3.00 2.79 3.48

OtherLiabilities .31 .48 .62 .62 .87
Long-termDebt 2.06 1.83 4.75 3.20 3.35
CapitalStock 2.54 2.55 2.55 4.05 4.05
Surplusand Reserves 2.75 2,08 2.44 2.65 3.04

and Equity
TotalLiabilities 8.31 8.30 13.36 13,31 14.79

Net CurrentAssets 2.01 2*07 1.68 1.89 2.74

Peat & Co.

Above tablesbasedon statementsof Price,Waterhouse,

* Dividends on OrdinarySharesare declaredin year indicated:actualpay-

year.
ment is made in following

-F, Due to extra allowrances for depreciation, the Company did not pay any
IncomeTaxes in these years. In place thereof a reserve for future
taxation contingencies was created.
-k** The Company added .175crores to the reserve for future taxation con-
tingencies, in addition to providing.348croresfor taxationfor
fiscal 1952.
 SCHEDULEXIII

THE STEEL CORVORATION

OF BENGAL, LIlITED

Summary of Earnings
(Crores of Indian Rupees)

Year Ended Total Depre- Net Income Interest Dividends Additions to

December 31 Revenue ciation after Taxes Paid paid* Surplus and
Available for Reserves
Interest

1946 3.25 .30 .27 .02 .22 .03

1947 4.71 *40 .14 .03 .o6 .06
1948 5.31 .40 .24 .03 .18 .03
1949 7.43 .40 .34 04 .27 .03
1950 7.66 .40 .33 .03 .27 .02
1951 9.49 .247 .242 .04 .31 .07

Summary Balance Sheets as of December 31

iCrores of Indian Rupees)

19240 1945 1949 1950 1951

ASSETS:

Current Assets .75 2.47 3.17 3.84 4.53

Fixed Assets 4.724 6.46 7.78 7.84 8.12
less; depreciation .05 1.95 3.445 3.84 4.25
Net Fixed Assets 4.51 4.33 3.88
Other Assets .42 .43 .31 .49 .85

Total Assets 5.86 7.41 7.81 8.33 9.26

LIABILITIES:

Current Liabilities .55 1.50 1.93 2.11 2.88

Other Liabilities .10 .65 .43 .36 .52
Long-term Debt 1.12 .49 .67 1.00 1.00
Capital Stock 4.oo 24.25 4.49 4,49 24.49
Surplus and Reserves .09 .52 .39 .37 .37

Total Liabilities 5.86 7.41 7.81 8.33 9.26

Net Current Assets .20 .97 1.34 1.73 1.65

Above tables based on statements of Lovelock & Lewes.

* Dividends on Ordinary Shares are declared in year indicated; actual

payment is made in following year.