Steel makers seek loan restructuring, interest moratorium

They want sustainable debt to be ascertained and refinanced under 5/25 scheme, payable after 25 years

Burdened with huge volume of loans and hostile macroeconomic factors, steel producers have sought a financial package from the Centre that allows debt restructuring.

Steel makers want sustainable debt to be ascertained and refinancing of the same under 5/25 scheme, payable after 25 years. Steel companies under the banner of Indian Chamber of Commerce (ICC) have submitted a slew of recommendations to the Niti Aayog.

"Unsustainable debt to be converted into 0.01 per cent cumulative redeemable preference shares (CRPS) payable after 25 years. Moratorium on payment of interest on loan for 3 to 5 years may be converted into CRPS", the memorandum stated.

 

Justifying the need for a special financial package, ICC said the steel sector was stressed due to external factors beyond the control of banks or promoters including changes in government policy or Supreme Court intervention.

The steel makers have also pressed the need for a financial Institution for the steel sector, along the lines of Power Finance Corporation (PFC) for taking over the loans of the sector from banks.

"The Government of India needs to either hike import duty or come out with a minimum import price on all grades of steel. Besides, loan restructuring for steel companies and a separate financial institution for the sector is sorely needed", said Ranjan Mishra, executive director, Visa Steel.

The memorandum says the import duty on steel long products and flat products needs to be increased to at least 15 per cent as per an enabling provision in Budget 2015. There was a need to combat cheaper imports either through imposition of 20 per cent safeguard duty or fixing minimum import price on imported steel long products including alloy steel.

"Creation of Steel Finance Corporation on the lines of PFC will be a welcome step as the SFC, being equipped with independent experts will function as a nodal agency to address policy issues. Further, a special financial package for steel sector is the need of the hour as most of the steel manufacturing companies are laden with debt for reasons not in the control of the banks or promoters", said a senior official at a steel company.

Other trade and policy measures sought by the steel companies are increase in export tax on chrome ore/chrome ore concentrates from 30 per cent to 50 per cent and imposition of 20 per cent safeguard duty on imported low ash metallurgical coke. They have also asked for a complete waiver on import duty on coking coal that stands at 2.5 per cent.