However, this alone is no solution to the industry's problems. Financial institutions have been busy debating whether or not to continue to fund steel projects. For them, it is the prospect of a huge 15 per cent of assets turning into NPAs.

But at a time when the economy is in a downturn, the very survival of the steel industry hinges on its access to cheap funds. The government's directive to the FIs to reschedule the debt payments of steel units must be seen in this light.

If SAIL is denied funds for mordernisation, there is very little chance of its coming out of the red. Tisco needs to expand its product profile to include more value-added products to improve its margins. Further, though there is some merit in the FIs' argument that a few industrialistshave not used the funds provided to them properly, the argument should not be used to deny financial assistance to the industry as a whole. In instances where financial irregularity is observed but the plant is technically sound, institutions could consider active participation in the management by converting loans into equity.

On their part, steel companies should stop trying to balance capacity with demand. Most of the idle inventory lying in the steel industry is because there is little synchronisation between the first stage of hot metal production and the final stage at cold rolling stage. If the industry concentrates on synchronising its processes, it will not only be able to match the flow of products to demand more easily, it will also realise substantial cost savings.