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India needs to put in place a funding agency exclusively for the steel sector, on the lines of Power Finance Corporation, state-owned firm SAIL said today.
“India’s steel making capacity currently stands at around 80 million tonnes per annum (mtpa). It is being projected to go up to 200 mtpa by 2020.
“But, there is not a single funding agency for steel sector, like PFC or REC in power. We need to have such an agency for the steel sector,” SAIL Chairman C S Verma told PTI in an interview.
According to industry thumb-rule, around $ 1 billion is needed for creating 1 mtpa capacity, which would call for an investment of $ 120 billion in the country’s steel sector in the next 6-7 years.
“We don’t have a specific bank or institution for steel sector and almost every bank has reached the maximum exposure limit for the sector. Now, there is so much funding required. Where do we get the money?” C S Verma said.
PFC has come a long way in its 25 years of journey from a modest disbursement of just Rs 101 crore in 1988 to a whopping Rs 34,122 crore in the 2011-12 fiscal. Cumulative disbursement by the company since inception stood at Rs 1,73,049 crore, as on March, 2011.
C S Verma’s views appear to have industry-wide support.
“The Indian government should have thought of this long ago. Though it intends to jack up the country’s steel making capacity to 200 mtpa by 2020, it is yet to take any initiative which would have helped the industry to raise capacity,” said an official at a leading private sector steel firm.
“It (such an agency for the sector) is due for more than a decade,” said another official.
The working group on steel industry for the 12th Five Year Plan, which pegged Rs 2.5 lakh crore investment in the sector up to 2017 for adding 60 mtpa capacity, had raised concerns about the means of funding in the sector.
“FDI in the steel sector has been lagging despite massive investment intentions by some major global steel majors. In order to ensure sufficient availability of financial resources for the growth of the industry, it is imperative to review steel related sectoral caps for the banking sector,” it had said.
“Government may also consider easing of norms connected with external borrowings. Special purpose long-term financing facility may be created to finance huge investment in new steel plants,” it said.
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