Sail, Tisco Credit To Hrc Users At Rs 1,700 Crore

While SAIL has sold HRC worth about Rs 1,200 crore to several companies on credit, Tisco has an outstanding of about Rs 500 crore. The entire Rs 500-crore worth of sales in the case of Tisco has been against unsecured credit, while half of SAILs out standing, roughly Rs 600 crore, is also against unsecured credit.

Most of the credit extended by SAIL is to pipe manufacturing units, like Jindal Pipes, Rajendra Tubes, Surya Roshni, Ambuja Tubes, and Gujarat Steel Tubes.

Companies that owe money to Tisco against HRC lifted by them include, Ispat Industries, Sipta Coated, Comet Steel, Nagarjuna Steel , Steel Tubes of India, and the Tata subsidiary Special Steels. Ispat alone owes Tisco Rs 72 crore, sources said. Repeated attempts to gets Tiscos comments on the issue proved futile.

 

This trend of extending unsecured credit to buyers by the two major steel producers is being seen as attempt to boost sales and stop inventories from piling up specially in the face of the sluggish markets conditions prevailing in the country.

The downslide in international HRC prices combined with the cut in import duty, besides increase in domestic input costs has pushed most steel producers against the wall.

The need to offer unsecured credit against supplies of HRC has arisen because of easy availability due to surplus capacities, lowering of import duties, liquidity crunch in the relevant segments of the industry and sluggish conditions for the end products of HRC, a SAIL spokesman said.

However SAIL claimed that credit was an integral part of any business transaction in a competitive market situation, and was one of the standard commercial terms in the iron and steel market.

It may be mentioned that, many of the private sector steel producers had decided not to sell against unsecured credit earlier this year because of the liquidity crunch.

Marketing of steel against unsecured credit has been a practise prevalent for the last three years and has the approval of the SAIL board, a SAIL spokesman said, adding, that the credit extended was much lower than Rs 1,200 crore, though he failed to quote a figure and refused to name the companies owing money to SAIL and the credit extended to them, as the information was against the commercial interest of SAIL.