Fis Seek Core Status For Steel Sector

Financial institutions (FIs) have demanded that the ailing domestic steel industry be conferred infrastructure status in the forthcoming Budget.

The other measures being demanded in the Budget to revive the industry's fortunes are an increase in the import duty, a ban on the import of seconds, export incentives and a reduction in the railway freight.

The institutions have reason to be worried as they have a whopping exposure of Rs 35,000 crore to this sector. A large part of this is now in danger of being classified as non-performing assets.

Institutional sources said that if these sops are given next year, it might be too late to save the beleaguered steel industry with attendant repercussions on the domestic lenders.

Institutional sources hinted at an agreement with the government for some support measures but refused to divulge any details.

"When all the other steel producing countries in the world are protecting their respective steel industries, why is our government not realising the fallout of such ignorance on the domestic steel industry," industry sources said.

The government expenditure on the infrastructure projects should increase and it should design strategies to increase the consumption of steel and focus on demand generation. The per capita steel consumption level at 26 kg is amongst the lowest in the world.

The domestic steel companies including Ispat Industries, Essar Steel, Jindal Vijaynagar Steel, Jindal Iron & Steel, Steel Authority of India and Lloyds Steel in which the financial institutions have a huge exposure have incurred losses to the tune of Rs 321 crore, Rs 345 crore, Rs 49 crore, Rs 96 crore, Rs 728.66 crore and Rs 406.51 crore, respectively.

The six steel majors put together have a combined capacity of 17 million tonne and account for around 70 per cent of the total production in the country.

The sorry state of the industry also reflects the fact that the compounded annual growth rate of profit after tax of the industry in the last five years has decreased by 33 per cent, while the total manufacturing sector experienced a growth of 2 per cent.