The plan, prepared for it by Industrial Development Bank of India, has been cleared by the steel ministry and is now before the finance ministry.The financial restructuring plan envisages lowering of SAIL's debt burden by around Rs 5,000 crore and thus enhance its market capitalisation.

SAIL has been left with an interest and depreciation burden of Rs 1400 crore following the urgently-needed modernisation of its Durgapur and Rourkela plants, which cost around Rs 10,000 crore.

SAIL earned a net profit of Rs 133 crore in 1997-98, but is expected to incur a loss of Rs 1200-1300 crore in 1998-99 after adjusting for depreciation and interest on Durgapur and Rourkela. For the nine months to December 31, 1998, SAIL reported a net loss of Rs 890 crore.

"There is little or no chance of changing thetrend at least over the next five to six years, unless SAIL can restructure its finances to reduce its huge debt burden," a SAIL official said, requesting anonymity.

SAIL had to modernise RSP and DSP, as their technologies were becoming obsolete. But it had to capitalise the modernisation expenses at a time when steel prices are extremely depressed and most steelmakers are in a crisis.

The modernised plants now face a depressed market and RSP is facing lack of orders for some of its products, with the result that their gross margins are not enough to cover the interest and depreciation burden. However, they are recovering the cost of production.

SAIL insiders feel that a price rise of around Rs 1,000 per tonne could give DSP a chance to break even. The government's decision to set a floor price on imports has yielded DSP benefits of only Rs 200-300 per tonne. With very little investment in the infrastructure sector, DSP cannot hope to increase product prices.