The government has stepped in to bail out nine steel projects, including Mesco's Mid East Steel. The steel ministry has forwarded the proposals to the lenders.

The projects, which are at the implementation stage, include Bellary Steel, SJK Steel Corporation, Remi Metals, Southern Iron and Steel, Malvika Steel, Kumar Iron and Steel, Neelachal Ispat and Jayaswal Neco.

The demands for bailouts followed the restructuring package finalised for three large steel companies -- Essar Steel, Jindal Vijaynagar and Ispat Industries -- in February 2003.

Government officials said the project co-ordination group headed by Steel Minister Braja Kishore Tripathi had asked the lenders to submit their responses by Friday.

In its proposal to relevant ministries, the group has raised various issues, including a demand to reduce power tariffs, the hike in gas prices resulting in an additional cost of $45 per million tonnes, the increase in Customs duty from 5 per cent to 10 per cent and the withdrawal of the facility to pay excise duty at the basic price level.

Apart from Tripathi, the project co-ordination group comprises officials from various ministries and industry representatives.

According to the proposal submitted by the group, lenders to Mid East have been asked to release the last tranche of funds amounting to Rs 28 crore (Rs 280 million) and also restructure the debt of the company factoring in the lower interest rate. The company was to be commissioned in 1997 but was facing a Central Bureau of Investigation probe.

Bellary Steel has sought additional funds of over Rs 850 crore (Rs 8.5 billion) in the form of working capital and loans. The lenders had asked the promoters to infuse funds of around Rs 105 crore (Rs 1.05 billuion).

As for the Salem-based Southern Iron and Steel, the project co-ordination group has said the company's debt is 6.8 times its equity, and has recommended waiver of interest worth Rs 310 crore (Rs 3.1 billion) and a reduction in interest rate from around 18 per cent to Libor-plus 1 per cent.

Remi Metals, which was referred to the Board for Industrial and Financial Reconstruction, has sought an additional term loan of Rs 3.3 crore (Rs 33 million) with a six-month postponement of repayments because of the delay in sanctioning loans by its lenders.

The Chhattisgarh-based Jayaswal Neco has also cited shortage of working capital and has demanded a restructured high-cost debt.

It has also sought permission to use the idle assets of Rajendra Steel on lease or by acquiring the facility.

SJK Steel Corporation has approached the government to ask lenders to adhere to the restructuring package cleared by them last year. Only Exim Bank and the General Insurance Corporation have kept their promise.

Some of the companies asked for the government's help in securing supplies of ore and coal, and for the completion of railway links, the officials said.

They said the corporate debt restructuring cell set up by the Reserve Bank of India, with representatives from all lenders and the finance ministry, had decided that the package extended to the three companies in February would be applicable to all steel manufacturers.

This includes reduction in interest rates on loans, conversion of debt into foreign currency loans at the average rate of 8 per cent for steel exporting firms and conversion of the overdue interest into zero-coupon bond.

Steel companies, on their part, have been asked to pledge a part of the equity and also for a write-down of 40 per cent of their equity.

Steel issues

• Reduction in power tariffs for steel companies.
• Production costs rise by $45 per million tonnes due to higher gas prices.
• Hike in Customs duty to 10 per cent may hit steel companies.
• Withdrawal of facility to pay excise duty at the basic price level.