The Steel Authority of India Ltd (SAIL) is likely to drop the Rs 600 crore revival proposal for its ailing subsidiary, Indian Iron and Steel Co Ltd, and settle for a Rs 100 crore survival plan instead.
SAIL would also seek around Rs 500 crore support from the government for retrenching around 10,000 workers as part of Iisco's voluntary retirement scheme (VRS). Iisco's current employee strength is about 24,000.
The Board for Industrial and Financial Reconstruction (BIFR) meeting is scheduled for September 5, 2001, and the government will have to take a decision on the Iisco survival plan before the date.
However, there is a question mark on the matter being taken by BIFR because of the government's decision to wind up that body. The Iisco issue may then be referred to the tribunal for sick enterprises.
The package will be worked out on the basis of the revised wage structure of SAIL for those opting for the VRS. If Iisco succeeds in retrenching 10,000 workers, the remaining workers' wages would be revised.
Wages account for 37 per cent of Iisco's sales turnover. In all other SAIL plants, it is less than 20 per cent.
In view of SAIL's present financial status, the public sector steel behemoth will not be able to fork out the Rs 600 crore for the revival of Iisco's steel plant.
The Iisco management had submitted a Rs 600 crore revival package for the plant and Rs 320 crore for VRS, based on the Mecon proposal.
Iisco had incurred a loss of Rs 210 crore in 1999-2000 and Rs 187 crore in 2000-01. Industry sources said, the government could also write off Iisco's losses. However, the Mecon proposal envisages Iisco earning profits at the end of two and a half years.
As part of the financial restructuring agreement signed by SAIL with the government, Iisco was to be converted into a joint venture, with SAIL having a minority stake.
Though due diligence has been completed by both the BHP-Mitsui combine and Tyazpromexport (TPE) of Russia, lack of interest in the plant on their part has led SAIL to consider implementing the survival programme.
