With banks reluctant to lend additionally to the highly leveraged steel sector, the government is evaluating the setting up of a funding agency exclusively for the sector much on the lines of Power Finance Corporation and the Rural Electrification Corporation for the electricity sector, the Financial Express newspaper said in a report.
The newspaper quoted sources as saying that the proposed entity could have an initial capital of Rs 2,500 crore and entail participation from all major domestic producers, sources said.
A committee formed by the steel ministry is likely to submit its recommendations in a month, the newspaper said, adding that the agency, if formed, would mainly fund capacity expansion projects of the domestic steel firms.
According to industry thumb-rule, around $1 billion is needed for creating 1 MTPA capacity, which would call for an investment of around $200 billion in the country’s steel sector in the next 9-10 years, as the country aspires to raise its capacity to 300 MTPA by 2025-26, it reported.
However, sitting on over Rs 3 lakh crore debt, steel sector has no means to correspond with the government’s intent. The plight of the industry is so acute that they have recently pleaded for a moratorium on interest payment to the steel ministry, the newspaper said.