The Indian government is evaluating the setting up of a funding agency exclusively for the steel sector much on the lines of Power Finance Corporation and the Rural Electrification Corporation for the electricity sector.
This is because banks are reluctant to lend additionally to the highly leveraged steel sector.
The proposed entity could have an initial capital of Rs 2,500 crore and entail participation from all major domestic producers.
A committee has already been formed by the steel ministry. The committee is headed by the chairman and managing director of state-run steel firm Rashtriya Ispat Nigam, P Madhusudan.
Sources said the committee is likely to submit its recommendations in a month.
Earlier, the Parliamentary Standing Committee on Steel and Coal had recommended us earlier to look into the possibility of setting up a funding agency for the steel sector on the same lines as PFC or REC for the power sector.
The agency, if formed, would mainly fund capacity expansion projects of the domestic steel firms.
The corpus of the agency would proposed to be gradually enhanced keeping in pace with the fund requirement of the steel firms. Paucity of funds is partly coming in the way for raising capacity of the domestic firms.
SOurce: ISMW