While the Cabinet Committee for Economic Affairs (CCEA) has recommended an additional provision of Rs 40 crore from the Steel Development Fund (SDF) for the Indian Iron and Steel Co (Iisco), cash balance with the fund stands at around Rs 27 crore.
Sources said, the fund already has a commitment of Rs 50 crore albeit over two years.
The depleting cash balance is primarily on account of loans pending with Steel Authority of India Ltd (SAIL) and Tata Steel. After writing off Rs 5,077 crore on SAIL's account in 1998, the total outstanding SAIL's SDF loan is around Rs 1,700 crore including principal, interest and penal interest dues.
SAIL and Tata Steel were the main contributors to the SDF through the cess on steel prior to de-regulation of steel prices. The steel majors have, however, resorted to a reworked repayment arrangement with SAIL having to pay Rs 45 crore and Tata Steel Rs 12 crore per annum.
Meanwhile, industry sources said the Rs 341 crore additional capital expenditure is likely to bring down production costs by Rs 700-800 a tonne, which will help bring down losses significantly.
Moreover, the reduction in workforce of 9,000 will also bring down cost of wages. Around 37 per cent of Iisco's sales income is spent on wages. Comparatively, wages in SAIL account for 17 per cent of income and in all other SAIL plants less than 20 per cent. Iisco's employee strength stands at 24,000.
The government finally came out with bailout package for Iisco, which has been with the BIFR since 1994. Apart from the capital investment, the Rs 1,485 crore package includes Rs 740 crore for voluntary retirement scheme, Rs 200 crore as cash outgo and Rs 200 crore tax-waiver from the West Bengal government.
