The government is considering whether to ease the repayment mechanism further for cash- starved steel companies which are facing the crunch due to persistent slowdown. “Many steel companies have approached for further easing of repayment mechanism. We are going through their request. It is at a very preliminary stage,” said a source.
Earlier this month, RBI announced Scheme for Sustainable Structuring of Stressed Assets (S4A) that envisages determination of the sustainable debt level for a stressed borrower, and bifurcation of the outstanding debt into sustainable debt and equity/quasi-equity instruments which are expected to provide upside to the lenders when the borrower turns around.
The gross Non Performing Assets (NPAs) of public sector banks (PSBs) increased from 5.43 per cent as of March 2015 to 7.30 per cent last December -- that is, from Rs 2,67,065 lakh crore, to Rs 3,61,731 lakh crore.
Steel sector is one of the highest contributors to the stressed assets of the banks which have total exposure of about Rs 3 lakh crore to the sector alone. If the proposal gets a headway, it would provide some respite to stressed companies such as JSPL and Essar Steel, among others, who are currently in dialogue with banks for loan recast. Steel companies are facing pressure from the lenders to ensure that loan repayment is not delayed.
As per the latest Reserve Bank Financial Stability Report, macro-stress test for sectoral credit risk revealed that in a severe stress scenario, among the select seven sectors, engineering, which had the highest Gross NPA ratio at 8.5 per cent as of September 2015.
It could see their gross NPA ratio moving up to 14.5 per cent by March 2017, followed by iron & steel (from 8.4 per cent to 11.5 per cent) and cement (from 6.4 per cent to 11.2 per cent), it had said.
Meanwhile, the steel ministry has come to the rescue of RINL by making a request to the Coal Ministry for allocation of thermal and coking coal blocks to the state-run steelmaker for its expansion and modernisation plans.
RINL’s Vizag Steel Plant (VSP) has doubled its capacity to 6.3 million tonnes per annum (mtpa) and is in the process of raising it to 7.3 mtpa through modernisation and upgradation of its existing units. It also has a plan to increase capacity to up to 20 mtpa.
“RINL has been requesting for direct allocation of thermal and coking coal blocks for quite some time. It has been urging for blocks at Baitrani West Terminal, Talabira I & II, Choritand Tilaiya, Utkal A, Rampia, etc in Odisha for captive use,” a senior government official said. Now, the Steel Ministry has requested the Coal Ministry to consider and expedite RINL’s case, the official added.
The Navratna company does not have captive source for coking coal and iron ore, and the Steel Ministry in its outlay for 2016-17 has allocated funds to acquire mines, a company official said.
“The acquisition of iron ore and coal mines, including investment through joint ventures (JVs), will be done to achieve self-reliance for raw material and cost reduction,” the official added.
In April last year, RINL signed an MoU with Andhra Pradesh Mineral Development Corporation (APMDC) for exploration and development of iron ore mining reserves over 2,800 hectares in Kukunur area of West Godavari district through the JV route.
Besides, it has a strategic tie-up for Rajasthan Mining Project (iron ore) at Bhilwara and the Indian Bureau of Mines has approved the mining plan.
On Banera mine, the company official said the matter is pursued with the Union Mines Ministry for reserving the block in favour of RINL as per the provisions of the Mines and Minerals (Development & Regulation) Act, 2015.