At an hour-long tete-a-tete with IDBI chief GP Gupta and its executive director SK Chakravorty, Basu urged the financial institution to guarantee overseas loans of steel companies and consider concessional interest rates for any `incremental funding' required for ongoing projects.

Basu told newspersons on Thursday evening that he had reason to believe that IDBI chief had given him a sympathetic hearing. It may be recalled that financial institutions had lately turned chary of funding cost overruns of incomplete steel projects, like Ispat Industries' hot rolled coils plant at Dolvi, Jindal Vijayanagara Steel Ltd (JVSL) and the second phase of Essar Steel's hot rolled coils project.

Basu, who has written to the IDBI chief twice before, reiterated the ministry's confidence in the goodhealth of the industry. He especially urged financial institutions to support projects that could not be completed for lack of funds.

"We have said, kindly allow the projects to be completed," he told newspersons. Basu suggested that repayment of the existing loans should be rescheduled, wherever the steel company was not in a position to pay back.

The steel secretary also urged financial institutions not to hold back `incremental funding' for projects to which they have already lent support. He sought concessional interest rates for such funding and suggested that the payment of interest be deferred, to allow the recession-hit steel promoters a breathing time.

He, however, pointed out that the ministry would not expect the financial institutions to take decisions that were not strictly commercial. "The health of the financial institution is of prime consideration even to us," he said.

Basu told the IDBI chief that financial institutions had a right to assess projects and impose conditionalities, butshould not withdraw support to the industry. Financial institutions have been insisting that promoters bring in more equity into projects that have suffered cost overruns.

The steel secretary also urged IDBI to help steel companies raise funds from abroad, by guaranteeing external commercial borrowings. He suggested that wherever possible financial institutions should help substitute existing ECBs with domestic term loans.

The steel ministry, and subsequently financial institutions, have approved 19 projects since steel was decontrolled in 1992, involving an investment of Rs 25,000 crore. The projects will add 13 million tonne of fresh steel making capacity, of which 4.5 million tonne has already been commissioned in six new steel plants.

The steel ministry is urging financial institutions to support the remaining projects, especially those nearing completion. "On facilities bringing in flat products, we have said `hold on,' for sometime," Basu said, adding that he had recommended a due diligence forprojects involving long products.

Incidentally, financial institutions had at one point refused to fund flat steel facilities, saying that an over-capacity in flats was impending.

The steel secretary said that the industry owed its plight to the shock of liberalisation at `one shot' in 1992 and otherwise possessed strong fundamentals. He pointed out that steel-making capacity had catapulted to 23 million tonne from 14 million tonne in the last eight years.

Steel exports during the period had soared to 3.4 million tonne from 0.3 million tonne. Basu said he was confident of continuing growth and that the Ninth Plan projections of 32 million tonne of steel would be met by the year 2002.