The Indian side was expecting the agreement to be signed during Russian prime minister Yevgeny Primakov's visit to the country, as the Indo- Russian joint commission had approved the plan. Primakov arrived in the country on Sunday and will return on Wednesday morning. During his stay, seven other agreements have been signed.

Steel secretary Ashok Basu said that Russia has promised to take a decision on Iisco soon, but sought more time to study the proposal. When pointed out that the Board for Industrial & Financial Reconstruction (BIFR) has asked the government to reply on Iisco by the year-end, the steel secretary said the BIFR would be given a reply. But he declined to divulge details.

Meanwhile, government sources said there are some legal hitches to becleared by the cabinet. They are optimistic that the agreement will be signed shortly, may be even before the end of the calendar year.

Sources said the chances of Russia backing out from the project are remote, as an Indo-Russian protocol was already signed on November 28 in Moscow at a meeting of the joint commission. "The agreement will be signed shortly. It is only a matter of time," they said.

The Indo-Russian Joint Commission had recommended the use of the Rs 30,000-crore rupee-rouble escrow account to fund the TPE's entry as an equity partner in the Rs 2,107-crore modernisation plan of Iisco, an ailing subsidiary of state-owned Steel Authority of India. A part of this fund could also be used to buy equipment for modernisation of Iisco's Burnpur and Kulti plants in West Bengal. A major chunk will, however, go to Iisco, while Kulti will get Rs 30 crore for the revamp.

In the proposed joint venture, SAIL will hold a majority 51 per cent and TPE the balance. The venture will have an equity base of Rs1,473 crore, of which TPE's contribution will be Rs 722 crore, to be funded from the escrow account.

Iisco's present equity base is Rs 388 crore. As part of the steel ministry's proposal, SAIL will pump in Rs 364 crore as additional equity. The rest will either constitute market borrowings or write-off by the Steel Development Fund.

A section of the ministry feels that Iisco's outstanding loan should be written off by the government so as to allow the joint venture to begin with a clean slate. As on March 31, 1998, Iisco had unsecured loans of Rs 1,580 crore, of which interest accrued and due on SAIL's loan was Rs 1,532 crore.

Industry sources said the government should allow a revaluation of Iisco's assets, which include real estate, quarries and mines. This will help it raise funds from the market. As on March 31, 1998, the book value of Iisco's assets was Rs 726.91 crore.

INSIGHT

Move will delay update plan

The two thousand crore plus modernisation programme of Iisco has taken aback seat, with the severe cash crunch position of parent company and also with lack of funds of similar magnitude with the steel development fund.

So to solve the problem, the government of India invited the Russian company to enter into JV with SAIL. Presently, the Russian government may be having currency crises or having second thoughts about investments in steel sector.

Under the present circumstances if Russians take more time for taking decision for going ahead for pumping money, the losses in IISCO would continue to be reflected in SAIL's balance sheet, while the modernisation program would continue to be put on hold.