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After the government came to the rescue of domestic steel producers by way of imposing minimum import price (MIP) last week, Indian Steel Association has requested for a special financial package to relieve them of the financial stress on account of factors beyond their control.
In a letter to the government and banks, the association has put forth their case saying the producers had made huge investments in the past in anticipation of a healthy business climate. But due to the fall in steel prices and high imports, most have be unable to reap any benefits and infact have to carry the debt burden for a longer-than-stipulated period.
"The average EBITDA margin of steel companies has dropped by over 40%. As a result, a large number of advances to the Iron&Steel sector are under stress, which may soon lead to NPAs (non-performing assets), if not addressed now," said the association in its request.
The severe erosion in EBITDA margin of domestic steel companies has impaired the debt servicing capacity of steel companies, it said. As most of these companies are unable to ramp up their operations due to shortage of working capital leading to a vicious cycle, this may lead to crippling their operations.
Apart from this fresh request for financial package, the association is also gearing up for request of anti-dumping duty on steel products which would shield the industry from cheap imports for a longer duration than the MIP which is effective for six months.
