To enable them to raise project finance afresh

Ambarish Mukherjee

New Delhi, Dec. 18

The Indian Steel Alliance (ISA) has urged the Government to allow steel companies to raise external debts and use them to retire their domestic debts. Though a similar demand has come from other sectors also, the ISA is of the opinion that this is particularly necessary for the steel sector so as to mobilise resources for greenfield ventures.

The industry experience has been that numerous announcements of setting up new steel plants have not gone down well with foreign investors and they have not responded favourably to external commercial borrowing (ECB) proposals for funding such projects.

Memorandum

In this context, ISA has urged the Government to allow the companies to leverage on their existing operations to raise funds for their greenfield expansion in a situation where domestic institutional exposure is already very high.

To achieve this, the ISA in its pre-budget memorandum submitted to the Ministry of Steel has urged for relaxation of the end use restrictions on ECBs and permit the companies to retire their rupee debt and to enable them to raise project finance afresh.

According to the ISA memorandum, "The industry experience reveals that foreign lenders are not considering ECBs for greenfield projects favourably. Simultaneously, Indian lenders and banks are not in a position to lend afresh due to their current exposure."

(This article was published in the Business Line print edition dated December 19, 2006)
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