149. Letter From the Chairman of the Operations Coordinating Board (Hoover) to the President of the Export-Import Bank (Edgerton)1
Dear General Edgerton: J.R.D. Tata and other representatives of the Tata Iron and Steel Company (TISCO) have come to the United States to seek financial assistance in expanding the capacity of their steel works by about 700,000 ingot tons.2 An ad hoc working group, representing the Department of the Treasury, the [Page 289] Department of State, Central Intelligence Agency, Foreign Operations Administration, The Department of Commerce, and the Export-Import Bank, considered the Tata visit and the probability that the Export-Import Bank would receive a request for a loan of somewhat less than $90 million. The working group drew the following conclusions from the point of view of U.S. security interests:3
- It is in the U.S. interest to lend funds on a sound proposal for expansion of Tata Iron and Steel Company capacity in India.
- The Export-Import Bank is preparing to consider Tata’s anticipated specific proposal.
- It is anticipated that sympathetic consideration will be given by the Export-Import Bank to the Tata application to the extent consistent with the soundness of the proposal and U.S. policies and objectives, including as feasible the maximum use of private resources.
- In view of the danger that fruitless or long protracted Tata negotiations might help the forces opposed to private steel expansion in India, it would be very much in the U.S. interest if it is possible to approve the Tata loan in principle before the departure of the Tata officials from Washington.
- There should be a press release covering any agreement, agreement in principle, or progress statement if favorable, at the time of their departure to forestall adverse press reports in India that might occur in the absence of more accurate information.
These conclusions were considered by the Operations Coordinating Board on May 25. The Board was impressed with the importance of the security interests involved and agreed that these interests should be drawn to the attention of both the NAC and the Export-Import Bank, with the request that they be taken into consideration.4
- Source: Department of State, Central Files, 891.331/5–955. Secret. Drafted by Staats and cleared by Overby. An identical letter was sent to George M. Humphrey, Chairman, National Advisory Council on International Monetary and Financial Problems.↩
- In late 1954, the Soviet Union had offered to construct a steel mill for India under easy credit terms. B.M. Birla, an Indian industrialist, then approached the United States and the United Kingdom seeking support for a privately-financed steel plant to counter the Soviet offer. He engaged in preliminary discussions with the Export-Import Bank. On May 25, 1955, a fellow industrialist, J.R.D. Tata, and some of his associates, held separate meetings with George V. Allen and Acting Assistant Secretary of State for Economic Affairs Thorsten V. Kalijarvi. Tata told the latter that private funding was not available, and that since he ruled out IBRD financing because of the requirement for an Indian Government loan guarantee, the Export-Import Bank was his major hope. Kalijarvi encouraged Tata to submit a formal application for assistance. Tata indicated to Allen that he hoped to raise $62.5 million in the United States, which he maintained would make it possible for him to show what private enterprise could accomplish in India while simultaneously allowing the United States to counter recent Soviet ventures. Allen replied that the proposal had to stand on its own merits and not appear to stem from the Soviet initiative, though he hoped private enterprise “would show the Soviet plant to a disadvantage”. (Memoranda of conversation by J. Robert Fluker, May 25; ibid., 891.331/5–2555)↩
- These conclusions were set down by the working group in a May 23 paper entitled “U.S. Aid for Expansion of Indian Steel Production Capacity,” which was an attachment to a memorandum from Staats to the Operations Coordinating Board dated May 24. (Ibid., OCB Files: Lot 61 D 385, India)↩
- EDGERTON replied to Hoover on June 15 informing him that there were no apparent obstacles to the extension of a loan to Tata. On the previous day, he had written Tata to assure him that the Export-Import Bank would be pleased to receive a formal application from him for the purpose of securing financing for U.S. services and equipment needed for his expansion program. (Ibid.) Ultimately, in June 1956, the IBRD approved a $75 million loan to pay for some of the foreign exchange costs of goods and services needed to boost Tata’s output. The loan was for a 15–year period at an interest rate of 43/4 percent. The loan, the largest the IBRD had made until then to industry and to Asia, was guaranteed by the Government of India.↩
- Printed from a copy which bears this stamped signature.↩