Bifr Intention To Wind Up Iisco Rattles Sail

The Board for Industrial and Financial Reconstruction (BIFR) has formed a prima facie opinion that Indian Iron & Steel Company Ltd (Iisco), the ailing subsidiary of Steel Authority of India Ltd (SAIL) cannot be revived on long term basis and it is "just and equitable and in public interest that it be wound up".

The principal reason cited by BIFR in its winding-up notice on Iisco is that there appeared to be no viable and agreed rehabilitation proposal with means of finance fully tied up for consideration before the board. In addition, no other party is available to take over the unit for rehabilitation. All possibilities of rehabilitating the company have been explored and exhausted, BIFR feels.

 

The closure of the huge Iisco complex would have a disastrous effect on the economy of West Bengal and its winding-up would signal the end of a 130-year-old company, once the favourite of punters on markets before privatisation.

Baffled officials at SAIL, when contacted, said the company was completely unaware of the development. Mihir Moitra, director (restructuring) said, in keeping with the decision of BIFR after the meeting on September 5, SAIL had time till November 5 to submit the revival proposal for Iisco.

The only investors who had displayed some interest had suggested that Iisco's steel plant be separated from the mines and Iisco be converted into a mining company. Iisco has rich iron ore mines with fabulous reserves. Chiria alone has 2 billion tonne of iron ore with 62 per cent ferrous content. The mines at Sukri have 64-65 per cent ferrous content.

Broken Hill Proprietary (BHP), the Australian mining giant, and one of the shortlisted joint venture parties for Iisco, was particularly interested in the mines. But, BHP wanted to bid for the mines separately which was not acceptable to the authorities.

Iisco's Kulti pipe plant employs around 3,200 people, with 14,613 more workers at Burnpur, 928 in the ore mines, 5,236 in collieries, and 320 in sales.

In 2000-01, Iisco achieved a turnover of Rs 941.37 crore, registering a growth of 2.5 per cent. The net loss for the year after charging depreciation (Rs 29.25 crore) and interest (Rs 11.25 crore) was Rs 187.31 crore. Saddled with outdated technology, Iisco has been making losses continuously since 1995-96.

BIFR had asked for an explanation from SAIL and the government as to why Iisco should not be wound up and awarded two months' time to submit a revival proposal. Moitra said SAIL has submitted a proposal to the steel ministry on the basis of the Mecon proposal. The plan was under consideration of the ministry.

Steel ministry sources however said, the ministry was likely to appeal to BIFR for some time.

Earlier, a plea made by SAIL and the Union ministry of steel for an extension of a revival scheme for Iisco from July 31, 2001, to January 31, 2002, was rejected by BIFR.

SAIL has made it clear it was in no position to fund Iisco's restructuring owing to its own losses. However, steel ministry sources indicated SAIL might shell out some money out of funds being raised from the market as a stopgap measure.

The proposal submitted by SAIL involves revival of the mines and plant and reduction of workforce by 9,000. Around 37 per cent of Iisco's sales income is spent on wages. Comparatively, wages in all other SAIL plants accounts for less than 20 per cent of sales income.

SAIL has been working for five years to rope in a joint venture partner at Iisco, which was declared a sick industrial company by BIFR in 1994. SAIL has stated that in view of its own losses, it was in no condition to fund Iisco's revival, unless the government extended financial support, at least in the form of loan guarantees, as was done for SAIL's (voluntary retirement scheme) VRS plan. SAIL could at most provide Rs 100 crore to keep the plant afloat.

The last EoI (expression of interest) notice issued by SAIL on April 14, 2000, saw TPE of Russia, BHP of Australia and Mitsui of Japan as respondents. Subsequently, BHP and Mitsui joined hands. After due diligence, they were supposed to submit financial bids by June 30. However, according to sources, the parties were just buying time. To make divestment attractive government had written off loans worth more than Rs 1,947 crore last year as part of SAIL's financial restructuring package.