Where is the question of our group being in default, Ruia countered, when just in March IDBI studied Essar Steel and sanctioned a fresh loan of Rs 378 crore? Amar Singh, in turn, charges that such loans being sanctioned are not proof of the group being financially sound, but of the fact that institutions are beingpressurised to extend new loans.

In his letter, Amar Singh has further pointed out that, due to adverse publicity, the last time the FIs were being forced to bail out the Essar Group a couple of months ago, they had laid down several tough preconditions. These included asking the group to bring back funds (Rs 216 crore) diverted by it to group companies, as well as private companies owned by its promoters -- the Ruias. But now, when the FIs are once again being pressurised to bail out the group no one is talking of these preconditions.

The Ruias, for their part, point out that this is not true, and that they have met Finance Ministry officials as well as various financial institutions to explain this. They say that with the sale of their power plant to Marathon, as well as the sale of other assets, they will fully meet all obligations.

Singh has also charged that, apart from the FIs, even the public sector Bharat Petroleum is being forced to pay close to Rs 6,000 crore to help the group. Amar Singh toldThe Indian Express that it made absolutely no sense for BPCL to buy out the Essar's stake in the grassroots refinery since there was no guarantee when it would actually come up -- after 4 years of raising funds, work on the refinery is yet to commence in earnest. ``Why should a public sector company be forced to buy out Essar's stake? Why not let Essar just auction it to the highest bidder in a transparent fashion?'' Amar Singh alleges that the Government has asked two organisations, including SBI Caps to evaluate the refinery's cost, and this will be used as a basis for what BPCL will pay. Prices of Essar Oil, the Essar Group's company setting up the refinery, have increased in recent weeks from a low of Rs 4 per share to Rs 13 primarily due to this belief that BPCL will bail out the group.

Ruia counters that BPCL has annual sales of around 18 mn tonnes of petroleum products, but has a refining capacity of just 8 million, so it does make sense for them to buy a refinery. As to the price, he says noone can force anyone to pay more than what the refinery is actually worth.

The SP politician also says that the reasons being given for bailing out the Ruias in the matter of their $250 mn loan is also strange. It is being argued, Singh says, that if the Ruias default, this will be seen as India defaulting. The fact is, Singh says, China did not provide any cover to foreign investors when GITIC went bankrupt -- when that did not slow down foreign investments in China, why will an Essar default slow foreign investment in India, he told The Indian Express.