Give financial package to steel sector; form body like PFC:ICC

Faced with a difficult business environment in global as well as domestic market, including cheap imports, the steel sector has sought a financial package from the government, industry body ICC has said.
In a letter to Finance Minister Arun Jaitley, it has also suggested establishing a financial institution, along the lines of Power Finance Corporation, for taking over the debts of steel companies from banks.
The steel sector is passing through a difficult phase due to factors such as unavailability of key steelmaking raw materials like ore in the absence of grant of leases and cancellation of coal blocks, said the Indian Chamber of Commerce (ICC).

Its problems have compounded due to "non-availability and unviable prices for iron ore as a result of closure of various mines due to Shah Commission investigation on illegal mining since 2010" and "sharp depreciation in Russian rouble, combined with Chinese over capacity and sharp increase in exports" resulting in over supply from China and Russia.
ICC Director General Rajeev Singh in the letter said: "Due to FTAs with Japan & Korea, steel is being imported at import duty of below 2.5 per cent which does not even take care of the higher interest costs and logistics costs including infrastructure bottlenecks."

Under the circumstances the margins of steel companies are not sufficient to service interest cost and loan repayment as they are running at low capacity.

The letter said that while RBI has been tightening its norms on restructuring of loans and any restructuring of loan makes the account classification as NPA, banks are not restructuring the loans to avoid NPA and invoking SDR in steel companies.
The Chamber, under the circumstances, sought, "financial package for restructuring of loans of steel companies" and suggested to ascertain sustainable debt and refinance the same under 5/25 scheme payable over 25 years.
It said unsustainable debt can be converted into 0.01 per cent CRPS (cumulative redeemable preference shares) payable after 25 years and demanded a "moratorium on payment of interest on loan for 3 to 5 years, which may be converted into CRPS.