 "Plan to save Tata Steel UK with pension reform said to be shelved")
As if the setbacks witnessed by Tata Steel, mainly pertaining to its Europe business, were not enough already, in yet another blow, the UK government's plan to save the company's UK business with pension reforms is said to have shelved.
Quoting industry figures, a Financial Times' report today said that a government plan to save Tata Steel's UK business by changing pensions law has been halted.
Due to the failure to resolve the pensions issue - the £15 billion British Steel scheme is in deficit - Tata's talks with Germany-based ThyssenKrupp over a potential tie-up of their European steel operations could get complicated, it said.
To help facilitate a deal, or even persuade Tata to keep the business, ministers wanted to detach it from the company and make it financially self-sufficient. But nearly three months after a public consultation closed the proposal is now in effect off the table, according to three people briefed on the matter reported financial times.
The plan has been dropped for several reasons such as Sajid Javid, former business secretary, has moved to a different cabinet post, new ThyssenKrupp proposals have emerged, and ministers feared that the plan was likely to be blocked in the House of Commons.
The plan involved changing the annual uplift in pensions - for existing pensioners - to a lower measure of inflation, plus other cuts to benefits. These changes would have reduced the scheme's long-term liabilities by about ?2.5bn but would have required a change to the 1995 Pensions Act. Pensions experts and politicians warned this could set a dangerous precedent and could lead to the dismantling of other defined benefit schemes.
Meanwhile, calls made by Business Standard to Tata Steel officials went unanswered.
"The understanding is that ThyssenKrupp have been explicit that they would not want the joint venture to take on the liabilities of the British Steel Pension Fund," the report quoted Roy Rickhuss, general secretary of the Community union as saying. "Tata needs to resolve the issue with the BSPF so talks can progress," he added.
In the quarter ended June, Tata Steel's consolidated net loss widened about 10 times to Rs 3,183 crore as against a Rs 317-crore loss in the corresponding period last year mainly on account of divestment of its long steel products division in the UK.
The management at its post earnings conference held here mentioned that success of its talks with ThyssenKrupp depended on several factors including pensions. The management also informed that it continues to explore options for a strategic collaboration through a potential joint venture for its UK business. "We cannot make any definitive disclosures at present, but we are in talks with all stakeholders to find a sustainable solution for UK operations," said Koushik Chatterjee, group executive director (finance and corporate) at Tata Steel.
