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Govt okays mega bailout package for SAIL

Neena Haridas in New Delhi

The Steel Authority of India Limited might get a new lease of life what with the Union Cabinet giving green signal to disinvestment and restructuring in the public sector steel giant. But SAIL's competition Ispat Steel is irked that the government has also waived off loans advanced to SAIL from Steel Development Fund amounting to Rs 50.73 billion and Rs 3.81 billion from the government.

It may be recalled that Ispat had opposed the loan waiver and had filed a petition in the court against the move. Arvind Pande, chairman, SAIL, says, "We have already filed a caveat, and whether the Supreme Court will take up the petition or not remains to be seen. In any case, it is a Cabinet decision to waive off the loan."

Ispat officials refused to comment on the subject maintaining that the matter is sub judice.

The waiver would also result in writing down of the assets of SAIL to the extent of Rs 30.01 billion and write off of loans advanced from SAIL (Rs 15.66 billion) as well as Government of India (Rs 3.81 billion) to IISCO. Another Rs 5.06 billion representing interest written off in the past on loans to IISCO from SAIL funds would be written back into SAIL's books.

Says Pande, "This will result in no dues from SAIL on account of IISCO. The loan waiver will ensure long term viablility of SAIL." The waiving off process will be carried out in the financial year 1999-2000 and the adjustments would be carried out with effect from April 1, 1999.

Meanwhile, the government has also decided to initiate the process of divestment in non-core assets such as the power plants in Bokaro, Durgapur and Rourkela within the next 6-9 months. Says Pande, "This will help SAIL to concentrate on its core activity of manufacturing carbon steel in its four integrated steel plants and bring in latest technology and investment in the non-core activities."

The divestment includes the 2x60 MW captive power plant-II at the Rourkela Steel Plant and the Central Power Training Institute Rourkela, 2x50 MW captive power plant-II at the Durgapur steel plant, and the 2x55 MW captive power plant-I, 3x60 MW captive power plant-II and steam generating capacity at the Bokaro Steel Plant.

The government has decided to divest its stake in the Salem steel plant and enter into a joint venture with a private partner by March 2001. Says Pande, "As to who the partner will be and how much will be divested etc will be decided in time."

The government stake in other steel plants such as the Alloy Steel Plant in Durgapur and Visvesvaraya Iron and Steel Ltd in Bhadrawati and the fertilser plant at Rourkela and the oxygen plant-2 at Bhilai Steel Plant too will be divested by March 2000.

Meanwhile, in a bid to revive IISCO, the government is considering joint venture with SAIL with a minority stake.

Pande said the revenue from the divestment will be pumped into the restructuring and upgradation of SAIL, which has recorded a loss of Rs 20 billion till the third quarter of 1999-2000.

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