Tata Steel, one of the largest private steel makers in India, has written to the Ministry of Finance and Steel Ministry, seeking a waiver of loans outstanding to the tune of ₹990 crore and interest thereof, that were granted to it from the Steel Development Fund. Tata Steel is also seeking a return “and refund” of its contribution lying in the Steel Development Fund “after waiver of the loan”.
The letter mentions that the representation is being made as per court’s direction. Tata Steel moved court seeking a loan waiver “on the same lines as is done by the government in respect of SAIL”.
“Waive the purported outstanding loans which were granted from SDF along with purported outstanding interest. To return and refund balance of contribution lying in SDF on account of Tata Steel after waiver of the loan,” the letter says.
What Tata Steel said?
Tata Steel mentions in its letter (reviewed by businessline) that SAIL was granted a loan waiver (from the fund) “on directions” of the Centre, to the tune of ₹5,073 crore.
“The waiver (to SAIL) could only be recognition of the fact that what was granted by way of loan to SAIL was in effect utilisation of steel producers’ money for the benefit of steel producers
The steel maker, further adds, loan given to it (Tata Steel) is “not from government’s coffer”, but the contribution was made by the company. It adds that the need to access its own funds at SDF is for “continuous up-gradation program of Tata Steel”.
“There is no point in holding up funds unnecessarily for non-productive purpose when it can legitimately be used by the contributors for the purpose of improvement and renovation of their plants,” the letter mentions.
Steel Development Fund
The Steel Development Fund came into existence during the “control period” (1978 and 1992) —when price of various categories of iron and steel came under various Acts like Essential Commodities Act and Iron and Steel (Control) Order. It was aimed at modernisation, research and development of production of desired category steel by “main steel plants”.
Main steel plants at that time included TISCO, IISCO, Hindustan Steel (Rourkela), Hindustan Steel (Bhilai), Hindustan Steel (Durgapur), SAIL, Bokaro Steel Plant and RINL. These mills sold offerings at controlled prices and the main steel plants had to add “ex works price” to their base price. The ex-works price was contribution towards SDF. Loans were advanced by the Joint Plant Committee from the fund’s corpus.
Over the years, IISCO which made contributions till 1983 was exempted from making contribution because of its financial problems. RINL too was exempted on similar grounds. In 1992, the price control was withdrawn and in 1994, contribution of main steel plants towards SDF was discontinued.