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Madhumita Chakraborty
New Delhi, Oct 12: Steel secretary Ashok Basu has written to Industrial Development Bank of India (IDBI) chairman GP Gupta seeking the support of financial institutions in completing projects that have suffered cost overruns.
The missive specifically requests IDBI to reschedule term loans and substitute external commercial borrowings with domestic funds, wherever possible. "Let there be conditions, if necessary," said a ministry official, "but the projects should not be allowed to remain incomplete."
The steel ministry has made similar requests to the union ministry of finance. At a tete-a-tete with finance minister Yashwant Sinha, steel minister Naveen Patnaik suggested that approved ECB should be replaced with concessional credit from domestic financial institutions, to be able to hedge the impact of the US sanctions on overseas borrowings.
Incidentally, the inter-ministerial working group, set up by the finance minister, is conferring on a revival package for the steel industry, again on Tuesday. Thecommittee, comprising representatives from the Union ministries of steel, commerce and the revenue department, discussed the plight of steel companies with financial institutions like IDBI and the Industrial Credit and Investment Corporation of India (ICICI) last week.
On Tuesday the panel, headed by special secretary (banking) CM Vasudev, has invited inputs from the corporate sector. The working group will discuss fiscal sops for steel producers, steps against dumping by overseas companies, financial reforms, measures to promote exports and even steps to boost the demand for steel, like higher government spending on infrastructure projects.
The centre's confidence in the steel industry stems from a belief that steel companies had essentially been hit by the overall economic slow-down, but would recover once the demand for steel picked up. Steel consumption is expected to get a fillip from the infrastructure projects on the anvil.
The steel secretary's letter to the IDBI chief was despatched a coupleof days before the financial institutions had their first brainstorming in Mumbai on reining in funds lent to new steel projects. The institutions discussed imposing conditions like, keeping the promoters' holding as collateral for additional term loans to steel companies.
The lenders also felt that promoters should bring in some funds in the form of equity, to tide over part of the project cost overruns. Ministry brass agree that ``promoters have to bring in their money'' too, but so should the institutions.
The communication between IDBI and the steel ministry did not dwell on individual projects, but seven steel ventures, of the 17 projects that began in the past six years, are known to have overshot their initial cost estimates. Essar Steel's hot rolled coils plant at Hazira is the only new steel venture that has made a plea for a rescheduling of its term loans.
The steel secretary's letter now lends weight to the industry-wide plea for institutional support to tide over the bad spell in theindustry. The financial institutions are, incidentally, scheduled to meet again on Monday for another round of talks on steel ventures awaiting their support.
The six units that have suffered cost overruns include Jindals Vijayanagar Steels' 1.57 million tonne-capacity plant at Bellary in Karnataka. The financial institutions (mostly ICICI) are expected to plough in another Rs 516 crore into the Rs 4138 crore project. The promoters are expected to bring in Rs 212 crore of additional equity.
Financial institutions are expected to increase their exposure to Ispat Industries' (Dolvi plant) by Rs 850 crore, while the promoters bring in another Rs 321 crore as share capital. Also awaiting the blessings of FIs are Usha India's six lakh tonne-capacity Malvika Steel plant at Jagdishpur in UP, the 1.7 lakh tonne-capacity Rajinder Steel plant at Raipur in Madhya Pradesh and Ispat Metallics.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
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