The Union Cabinet yesterday approved a Rs 8,454 crore financial package for Steel Authority of India Ltd (SAIL).
The package includes a loan waiver of Rs 5,454 crore and conversion of several non-core businesses of the PSU into joint ventures in a time-bound manner.
The Cabinet also cleared a National Population Policy, whose objective is to ensure a stable population by 2045 and bring down the total fertility rate to replacement level by 2010.
It also approved Indian Airlines' proposal to reduce its retirement age from 60 years to 58 years and a cooperation agreement between the European aviation industry and regulatory authorities with their Indian counterparts.
The Cabinet Committee on Economic Affairs, which met along with the Cabinet, decided to clear Dishnet Services' proposal to induct up to 45 per cent foreign equity through equity placement and issue of American depository receipts and global depository receipts.
It also extended the deadline for cellular and mobile telecom providers to pay their licence fee arrears till March 15.
As part of the package for SAIL, the Cabinet decided to provide a government guarantee for the steel major to raise Rs 2,500 crore from the market. Of this, Rs 1,500 crore will be used for funding a voluntary retirement scheme (VRS) and the rest for meeting repayment liabilities and working capital requirements.
SAIL had earlier been granted a government guarantee for Rs 500 crore, which it raised last month.
Briefing reporters on the Cabinet decisions, information technology minister Pramod Mahajan said of the total loan waiver granted to the company, Rs 5,073 crore would be from the Steel Development Fund (SDF) loan and Rs 381 crore from the Centre. The SDF figure has been arrived at on the basis of interest capitalisation of Rs 3,001 crore and a Rs 2,072 crore SAIL loan to Indian Iron and Steel Company (Iisco).
The loan waiver will improve SAIL's debt-equity ratio to 3.2:1 from the current level of 4.2:1.
Reacting to the decision, SAIL chairman Arvind Pande said,"Through the process of restructuring, the company is sure to bounce back and emerge as a force to reckon with." According to company sources, the loan waiver will help the company save about Rs 700 crore this year and Rs 250 crore in the next fiscal. Steel ministry sources said even after the approval of the financial and business restructuring plans, SAIL is still projected to lose about Rs 125 crore in the next fiscal. The company is projected to finally turn around only in 2002-2003. SAIL's proposed disinvestment in non-core businesses such as the power plant, oxygen plant II at Bhilai and fertiliser plant at Durgapur and subsidiaries such as Iisco, Salem Steel Plant, Visveswaraya Iron and Steel Ltd at Bhadrawati and Alloy Steel Plant at Durgapur are to be completed over a three-year period.
Disinvestment in the power and oxygen plants is to be done within nine months. For the proposed joint venture projects, SAIL will have to enter into a memorandum of understanding (MoU) with the steel ministry.
SAIL has already shortlisted Enron and BSES for its proposed joint venture for the power plant and has been waiting for the Cabinet decision before taking a decision on its prospective partner.
Though the decision on the exact stake SAIL will hold in each of the proposed JVs has been left to the PSU's board, the Cabinet approval stipulates that SAIL will have to hold a minority stake in any venture for Iisco.
A three-member committee comprising the Union cabinet, finance and steel secretaries will monitor SAIL's business restructuring programme.
SAIL's networth, which stood at Rs 8,400 crore during its peak performance, is currently down at Rs 4,835 crore. The company has equity capital of Rs 4,130 crore.
The company posted a loss of Rs 1574 crore during the last fiscal and suffered fall of over Rs.2000 crore in the first nine months of 1999-2000.
SAVING SAIL
* Loans worth Rs 5,454 cr to be waived; Rs 5,073 or from the Steel Development Fund and Rs 381 or from the Centre
* The government will gurantee market borrowing worth Rs 2,500 cr by the company
* Rs 1,500 cr will be used for funding a volunmtary retirement scheme
* Rs 1,000 cr will be used to meet repayment liabilities and working capital requirements
* The loan waiver will reduce SAIl's total outstandings from Rs 20,680 cr to Rs 15,226 cr
* SAIL will divest in non-crore business like power and oxygen generation and production of alloy/special steels and fertilisers.
* Funds released through divestment of non-core business will be used to finance the technological needs of its main steel plants at Bhilai, Bokaro, Durgapur and Rourkela
* A three-member official committee, consisting of the cabinet, finance and steel secrtaries will monitor SAIL's business restructuring programme.
