State-run steel majors such as SAIL or RINL could lend expert teams or take on management contracts to run sick entities such as Bhushan and Essar Steel that are set to be taken over by banks under new RBI recovery norms.
"We can consider lending expert teams to run steel firms taken over by banks or some other way to run them ... but SAIL and RINL have too much on their plates, they cannot take over sick steel units," steel minister Chaudhary Birender Singh said in an interview to The Telegraph.
The RBI has already identified 12 extremely stressed assets which banks are trying to take over and these include Essar Steel, Electrosteel, Bhushan Steel and Monnet Ispat. Essar had tried to stall the move, but without success.
Banks and the finance ministry had earlier wanted SAIL and other steel sector PSUs to take over the stressed assets.
However, SAIL declined to play ball, and the steel ministry supported the decision as this could deplete the PSU's major's cash reserves at a time it was just turning the corner - from making cash losses to cash profits.
"At a time when we are telling PSUs that they are not holy cows and they have to improve their performance to stave off privatisation, we can hardly saddle them with sick private players," Singh said.
Officials said these PSUs could be asked to run "sick" steel firms taken over by banks "on behalf of the banks".
Debt mountain
The 12 companies identified by the RBI for immediate action have a total unpaid debt of Rs 2.22 lakh crore.
Steel companies accounted for Rs 1.06 lakh crore of the loans, with Bhushan Steel leading the list with an unpaid debt of Rs 44,885 crore, followed by Essar with a bill of Rs 37,284 crore. Monnet Ispat has a bad debt problem of Rs 12,919 crore and Electrosteel Steels, another 11,304 crore.
"Due to a combination of factors, including the international market conditions, some Rs 3.1 lakh crore of stressed assets with banks are in the steel sector, that is 28 per cent of all stressed assets with banks.
"However, we have been reviewing the measures which bankers and steel firms have undertaken to reduce this and we feel the scenario is improving despite the fact that 3-4 large firms are right now in the focus for insolvency," said Singh.
"One positive factor is that 57 per cent of our steel production is in the secondary steel sector and this sector is more or less safe from the malaise with a very low rate of bad loans," the minister added.
The minister, who had recently been to Canada to scout for coking coal, said the sudden fluctuations of global prices and India's over-reliance on one or two suppliers were "holding the country hostage".
"One morning the price of coking coal is $70 a ton and next it's $300 a ton, we need other sources," said Singh. Prices had shot up following the disruption of supplies from Australian mines, hit by cyclone Debbie in April.
Source: The Telegraph