Stressed over high debt, the struggling steel industry is expecting the government to announce a comprehensive financial package in the Budget.

Blaming sudden changes in government policy and Supreme Court interventions in mining, coupled with the global meltdown in metal prices, the Indian Steel Association has pitched for a special financial package to wriggle out of the strain caused due to external factors and reasons beyond the control of banks or promoters.

The industry has sought a moratorium on payment of interest on loan for three to five years. It wants lenders to convert interest into cumulative redeemable preferential shares. A review of steel industry should be done to ascertain sustainable debt and refinance the same under 5/25 scheme payable over 25 years, while unsustainable debt should be converted into 0.01 per cent CRPS (cumulative redeemable preferential shares) payable after 25 years, it said.

(The 5:25 scheme allows banks to extend long-term loans of 20 years to match the cash flow, while refinancing them every 5 years. Until now, banks were typically not lending beyond 10-12 years.)

H Shivramkrishnan, Chief Commercial Officer, Essar Steel India, said the financial package is needed for the industry to tide over the current crisis on account of cheap and unfair imports.

The import duty on all steel-making raw materials should be reduced and the clean energy cess of ₹200 a tonne should be exempted, especially for steel plants which are accredited with ISO 14001 or with clean development mechanism under Kyoto Protocol, he said.

The Centre should also extend support to restart all gas-based steel plants in line with policy for stranded gas-based power plants, thereby generating incremental economic activity within the country, Shivramkrishnan said.

The trade body has sought to device a transparent process for the Indian Bureau of Mines to declare prices of monthly despatch of iron ore and chrome ore and collect royalty on actual grade rather than highest grade being sold.

Siddharth Mehta, Partner - Indirect Tax, KPMG India, said given the cost pressures and subdued global demand, the steel industry is expecting the Finance Minister to announce measures aimed at making domestic manufacturing more competitive compared to imports.

This can be accomplished through a slew of measures, such as a hike in customs duty on imported steel and reduction in duty on import of critical inputs such as iron ore and coking coal.

This, coupled with other structural reforms such as rationalisation of Cenvat credit regime, can go a long way in providing the much-needed boost to the industry, he added.

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