Sdf Panel Scuttles Tata Steels Loan Bid

The joint plant committee (JPC) has put Tata Steel's fresh borrowings in jeopardy with the committee refusing to issue a no objection certificate (NOC) to the company for its Rs 300 crore loan from the Industrial Development Bank of India (IDBI).

It is mandatory for Tata Steel to obtain a NOC from JPC, which manages the Steel Development Fund (SDF). The refusal comes in wake of Tata Steel's outstanding SDF loan, including funded interest, of Rs 1350.49 crore as on March 31, 2001.

R C Nandrajog, vice-president (finance) of Tata Steel, confirming the development, said under the agreement, Tata Steel has to obtain a NOC from JPC before any fresh borrowing. "JPC had sought some clarifications from the company and we have duly replied" he added.

 

Tata Steel had initially asked for a NOC to raise Rs 500 crore. Subsequently JPC issued a NOC for Rs 200 crore. The amount is being raised for "day today operations".

S K Sinha, executive secretary of JPC, said, "After JPC refused to issue a NOC, IDBI sent a letter of recommendation saying that Tata Steel can borrow money from the market. But, after discussions with nationalised banks, we are of the opinion that such a letter cannot be issued by IDBI taking into consideration the outstanding loans and interest of Tata Steel".

Further, JPC has asked for re-assessment of the justification regarding the recommendation of IDBI from the finance ministry.

Sinha also said that Tata Steel has officially written to N N Khanna, steel secretary, on the issue. His decision will be final as the secretary (steel) also happens to be the chairman of the SDF Managing Committee.

Any decision taken by JPC would also have to be ratified by the SDF managing committee.

Sinha said, previously the interest was recycled as loan. "But as per the cabinet decision, no interest can be recycled as loan" he said. Under the cabinet decision of 1997, Tata Steel was supposed to pay Rs 10-12 crore per month. Thereafter, Tata Steel appealed that the company was not in a position to pay that amount and came to settlement of Rs 1 crore per month as interest.

Tata Steel had also sought a loan waiver of Rs 1,250 crore from the SDF but the managing committee decided against recommending the case.