The company, which has a 3.4 million tonne capacity shore-based integrated steel plant at Visakhapatnam, has accumulated losses of more than Rs 3,593 crore. The Cabinet committee gave its nod to converting more than Rs 1200 crore of government loans into non-cumulative preference shares and to writing off Rs 295.49 crore of RINL's losses.

The Centre, which is the sole shareholder in RINL, will convert Rs 791 crore of its interest-free loans to the company into seven per cent non-cumulative preference shares, redeemable after 2000-01. The fresh equity will not only augment RINL's already large capital base of Rs 6,493.84 crore, but will also spare the company of its loan repayment obligation in 1999-2000.

The Centre will also convert Rs 542.47 crore of its loans to RINL, releasedbetween 1992-93 and 1995-96, into seven per cent non-cumulative preference shares, redeemable after 10 years. The public sector undertaking will, moreover, be exempted from paying any interest on these shares till they are due for redemption.

The steel plant, which went on stream in August 1992, attained optimum capacity utilisation in 1996-97 and made a net profit of Rs 12 crore for the first time last year. According to an official release, RINL had budgeted for a net cumulative profit in 2004-05.