IDBI delays steel package

The panel, chaired by IDBI chief G P Gupta, had recommended an assistance of nearly Rs 976 crore to the five projects. In fact, all these projects, where institutionsalready huge exposures, had incurred huge cost overruns and yet to be completed. The IDBI board set up the sub-committee to evaluate the needs of each project thoroughly.

“The steel sector has now become a political issue. Various charges and counter-charges are being levelled in the parliament. It will be prudent on the part of institutions to wait for some time before extending financial assistance to steel companies. We don’t want to be drawn into the controversy,” said an institutional source, adding, “we’re not in a hurry to sanction loans. It’s not only steel, several sectors like textiles and petrochemicals also need funds.”

Guruswamy’s allegations had rocked the Parliament on Friday with members demanding a Joint Parliamentary Committee probe into the charges. Congress MP Shiv Shanker had said in the Parliament on Friday that Guruswamy has alleged that the decision to hike the floor price for steel imports had resulted in virtually giving away Rs 5,000 crore to the country’s steel producers.He had also mentioned about some ministers lobbying on behalf of some industrial groups. Former Prime Minister H D Deve Gowda also joined Shiv Shankar, and asked for a probe as to how the DGFT had fixed the floor price for steel imports.

In fact, Guruswamy had told The Indian Express recently that the inter-ministerial committee looking into the matter had recommended a price of $ 247 a tonne but the final government notification fixed the price at $ 302. This difference allowed local producers to hike their prices, thereby making a killing.

While on the one hand steel companies will be getting fresh loans, they got another bonanza with the recent floor price on imports and hike in prices. Interestingly, the Customs department has imposed a fine of Rs 57 crore on one of the steel companies which had sought fresh loans. Also, State Bank of India has sent a letter to another steel company questioning diversion of funds.

It may be recalled that 14 private steel companies had sought additional assistanceworth Rs 7,740 crore institutions to complete their projects. This is at a time when the institutions already have an exposure of Rs 14,000 crore in these companies. The IDBI panel, however, shortlisted the steel companies and recommended only five of them to the board. While sanctioning a Rs 850 crore financial package for Essar Oil, financial institutions had recently imposed strict conditions on the company.