With steel firms jostling with a pile of Rs 3 lakh crore of debt and falling demand, the government has approached banks to seek debt revamp including lowering the interest rates and extending the loan tenor for the sector.
Sources told Bloomberg TV India, Steel Ministry is talking to major lenders like the State Bank of India to help reduce the debt burden of steel companies.
The news of debt revamp and dismal Q3 results of a private bank roiled stocks of lenders having high exposure in steel. SBI was down 2.5 per cent, PNB 3.3 per cent, BoB 3.1 per cent, ICICI Bank 1.1 per cent and Yes Bank 2.9 per cent in a weak Mumbai market whose benchmark was down 143 points or 0.58 per cent at 24,682.
On January 8, Steel Secretary Aruna Sundarajan recently met officials of SBI and other lenders having high exposure in steel sector to work out a package for the sector. “The government has asked banks if the interest rate on loans to steel firms could be lowered and the tenor be extended,” an official said.
The meeting came a day after steel firms such as Essar Steel, SAIL and JSPL sought the intervention of Steel Ministry for a comprehensive debt revamp package.
The steel companies have submitted a survival plan for the sector in the midst of massive dumping of cheaper steel by countries like China, high interest burden and falling demand in India and abroad.
The steel industry has also demanded imposition of minimum import price to safeguard domestic firms.
On January 6, Commerce Minister Nirmala Sitharaman told Bloomberg TV India that she was in consultation with Steel Ministry regarding steps to alleviate pressures faced by the steel industry because of dumping of cheap Chinese imports. "The bigger worry is the excess capacity of many of the commodities which form the raw material base for us which China is sitting on,” she said.
Sitharaman, however, said the Commerce Minister wants to strike a balance between providing cheap raw materials for labour intensive industries and keeping domestic industry competitive. “We do not want to rush into any decision,” she said but added the Yuan devaluation is a cause of worry.
Much of downturn in the commodity cycle is attributed to rapid ramp up capacity by China. While the world’s second largest is slowing, analysts say the downturn in commodity cycle for at least next 2 years.
Analysts say it might take another two years for China to utilise or shut down 100- 200 million tonne of steel capacity.
Source: Btvin