The law ministry clarification had come after the finance ministry sought its opinion on whether anyone had the authority to waive SDF borrowings.

North Block was confused on the issue because the SDF corpus was outside the public account. It had, at one point, argued that the fund belonged the consumers and the loaned amounts would be difficult to waive as the borrowings were on the basis of tight legal agreements.

Despite the legal opinion, North Block is still not convinced of the viability of the revival plan drawn up for the second time by SAIL.

Apparently, all legal issues on the waiver of borrowed ammount have not been resolved. The confusion is over who exactly has the right to waive the transactions.Should it be the trustees of the SDF (who function autonomously) or should it be the Government? Then again, a division bench is hearing a petition filed by the steel industry challenging the waiver and the court outcome will have an important bearing on whether the write-off takes place or not.

The finance ministry is also arguing that the waiver will no doubt help in clearing the balance sheet of SAIL but will not improve the cash flows unless parallel steps are taken to tackle intrinsic inefficiences within the huge company.

North Block wants the ministry of steel to sign a memorandum of understanding (MoU) with SAIL for a comprehensive rehabilitation package. The MOU should set targets not just on achieving physical production targets but on several fronts, including cutting down operational costs, downsizing work force, and pushing through savings on heads like marketing and supply chains.