Pm Okays Russian Proposal For Iisco Modernisation

Prime Minister Inder Kumar Gujral has asked the steel ministry to work out the modalities of the proposal for a joint venture between Steel Authority of India Ltd (SAIL) and the Russian trading house Tyazhpromexport for the modernisation of the ailing SAIL subsidiary at Burnpur, Indian Iron and Steel Company (Iisco).

The Iisco issue came up on Friday during a meeting between the Prime Minister and representatives of steel sector PSUs (public sector undertakings) from West Bengal, who had called on the former to discuss the needs of their units.

At the meeting, the finance minister said that the Union government is awaiting the response of the Russian government on the utilisation of the rupee-rouble fund for Iisco's modernisation.

 

Till the Russian government's guidelines on the rupee-rouble fund are communicated to the Indian government, the joint venture proposal could be worked out, the delegation was told.

Tyazhpromexport, is interested in supplying equipment against the deferred payment guarantee through the Russian escrow account.

The steel ministry had earlier referred the matter to the finance ministry since Tyazhpromexport proposes to route part of its capital investment in the ailing unit through the rupee-rouble account.

The finance ministry replied that utilisation of the rupee-rouble account for capital investment in projects will require a separate agreement between the governments of the two countries.

The rupee-rouble debt repayment method was agreed upon bilaterally for trade purposes and has not been used for capital investment in projects. Hence the matter was referred to the finance ministry.

Iisco, which is presently a wholly-owned SAIL subsidiary, had been referred to the Board for Industrial and Financial Reconstruction (BIFR) more than two years back.

In August 1996, the Board for Industrial and Financial Reconstruction suggested a revival plan for Iisco with Steel Authority of India holding 51 per cent stake.

As per a BIFR directive, SAIL floated a global tender for Iisco's modernisation.

The tender attracted bids from the Russian trading house Tyazhpromexport and the Japanese trading giant Mitsui. Mitsui later backed out.

Accroding to the Board for Industrial and Financial Reconstruction formula, the private partner in the Iisco revival projectwould have to pick up 37 per cent of the equity, while the West Bengal government and the employees of the plant would pick up 6 per cent stake each.