The Indian Steel Association (ISA) has written to the government and Indian Banks Association (IBA) for a financial package for the steel industry in line with a similar support extended to the textile and sugar sectors.
India has emerged as the third largest producer of steel in FY16 with a production capacity of 110 million tons (mt).
Considerable investments have been made towards expansion, modernisation and new product and technology lines, leading to huge borrowings.
However, capacity utilisation has fallen 10% on huge imports in recent times, leading to financial stress.
EBIDTA margins of steel companies have dropped by 40% and this has impaired debt servicing.
While the government has taken positive steps like a safeguard duty and MIP, there is requirement of a support system from all stakeholders for survival of the industry, the ISA said.
The ISA called for a short-term moratorium on payments of interest and principal amount and segregation of sustainable and balance debt.
“The sustainable debt will consist of long-term debt as well as working capital required to run business at optimum capacity level and to generate pre-determined debt service coverage ratio,” the association said.
The remaining part of the debt, that is the balance debt, is proposed to be repaid over an extended period of time by converting it into redeemable preference shares or redeemable bonds, the association added.
Source: ISMW