The Union Ministry of Steel proposes to convert Hindustan Steelworks Construction Ltd's (HSCL) Rs 513.1-crore accumulated non-Plan borrowings from the Government into non-cumulative redeemable preference equity.
This follows the objection from the Union Ministry of Finance to the earlier draft proposal for a waiver of the historical burden of HSCL, now a profitable public-sector infrastructure builder under the Steel Ministry.
According to highly placed Government sources, the Board for Reconstruction of Public Sector Enterprises, the advisory body to the Government on revival and restructuring of State-owned companies, has also strongly supported the fresh proposal.
Dr Nitish Sengupta, Chairman of the advisory body, in a recent letter, sought intervention of the Finance Minister for an early clearance of the revised proposal, so that the Government can recover the principal amount from the company as well as earn dividends.
The Union the Ministry of Finance is likely to take the final call by the end of this month on the revised proposal. The modified rehabilitation package involves conversion past borrowings (under Plan account of Rs 67.62 crore and non-Plan figure of Rs 31.12 crore) into equity, Plan-loan interest waiver, and also turning accumulated interest burden on non-Plan loan into equity.
“HSCL will indeed be in a position to return to the list of dividend-paying PSEs (public sector enterprises) for the financial year to March 31, 2011, if the financial restructuring package is cleared by the Government,” Mr Malay Chatterjee, Chairman and Managing Director of the company told Business Line .
The Finance Ministry is understood to have expressed in-principle approval earlier on other elements of the restructuring proposal.
Under the restructuring plan, the unlisted company will add Rs 580.24 crore to an equity base of Rs 117 crore.
The Finance Ministry has also agreed to the plan for providing Government guarantee to the company's bankers, including State Bank of India, Vijaya Bank and ICICI Bank, for past borrowings. The company, however, will have to repay the borrowed sum — Rs 518 crore — to the banks in ten years from the time of package approval.