Confirming the development, a source who attended the meeting said the UK-based firm will hold 51 per cent, while the balance will held by Essar Steel. The meeting was attended by heads of IDBI, ICICI, IFCI and the Unit Trust of India.

HIM also cleared a proposal to pump in Rs 300 crore into Haldia Petrochemical. According to sources who attended the meeting, a decision was taken to bridge the gap between the fund requirements of Rs 990 crore and the Rs 600 crore that the petrochemical company intends to pick up through a optionally fully convertible debenture issue and deferred credit from suppliers and advances from customers.

Sources said that the Essar Oil-Marathon deal was not discussed as the bankers toMarathon had still not got back to the FI officials. The US oil major had asked for a reduction in the cost of borrowed funds to 15 per cent from 19 per cent from IDBI. The deal is now set to miss the August 31 deadline.

Earlier, Essar had agreed to dilute its stake in Essar Minerals by 30 per cent to Stemcor to help the company complete the pipeline and benefication plant. The deal is expected to help Essar Minerals tide over the cash crunch that the group is facing. The deal is expected to help Essar Steel to transfer its Rs 500-crore debt to Essar Minerals while Stemcor will also arrange debt of Rs 300 crore.

EML, which is a subsidiary of Essar Steel, presently operates through a 3.3-million-tonne pellet plant at Vizag and was formed by spinning off the pellet complex into a separate company. While pellet is a raw material used for the manufacture of hot briquetted iron (HBI) it is made from iron-ore fines which EML prcures from the Bailadila mines.

By acquiring a majority stake in Essar Minerals,the UK company will ensure that it has an assured source of DR grade pellets for supply to China, south-east Asia, Iran and Qatar.

Ruias had sought an assistance of Rs 380 crore for the pellet project that the company was setting up. This included the setting up of a slurry pipeline of 268 kilometers with a view to reduce costs. Sources said that the deal will reduce the debt burden to the extent of the funds to be received from divestment in Essar Power and the spin off of the pellet complex into a separate company.