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SAIL bond issue to fund IISCO revival

Calcutta, Oct. 21: The Steel Authority of India Ltd (SAIL) is likely to raise Rs 550 crore through an issue of governmen-guaranteed bonds to part finance the revival of its loss-making subsidiary Indian Iron & Steel Company (IISCO). Sources said the bond issue is awaiting the government’s approval.

Of the Rs 550 crore to be raised through the bond issue, about Rs 350 crore will be used to fund IISCO’s voluntary retirement scheme that aims to reduce manpower by 9,000. While the revival of Burnpur Works will require a direct investment of Rs 230 crore, that of the collieries and iron ore mines will involve about Rs 111 crore.

However, the entire investment may not be made at one go. “Everything depends on the availability of funds,” they said.

Sources nevertheless remained non-committal so far as the time of issue and coupon rate of the bonds were concerned. “Since the bonds will be guaranteed by the government, it is very likely that the cost of funds will be cheaper than the existing prime lending rate of banks. But so long as we do not get government clearance, nothing concrete on the coupon rate can be announced,” they said.

Earlier, the government refused to fund Iisco’s Rs 1,400-crore revival plan.

The government agreed to provide only Rs 184 crore towards obligations for VRS while the total requirement for this purpose is Rs 540 crore.

The VRS aims to reduce Kulti Works’ payroll by 3,000, which will be closed down eventually. About 5,000 workers will be given the golden handshake in Burnpur Works and 1,000 in the collieries and ore mines. The investment will help Iisco raise its production capacity from three lakh tonnes to 5.4 lakh tonnes of saleable steel.

“The cost of production will also be drastically reduced, making Iisco products highly competitive in the domestic market. IISCO has a very rich asset base and skilled manpower which, if properly used, can do wonders even in the short time,” they added.

The investment for upgradation will include setting up of a sinter plant, two new blast furnaces and a new wire rod mill.

The finishing mills, they said, will give the company much better price realisation.

Meanwhile, the West Bengal unit of INTUC has opposed the proposed closure of Kulti Works.

“Kulti Works is being made a sacrificial goat for the survival of Burnpur Works. Kulti has been left out from the revival plan when an investment of a mere Rs 20 crore could revive this plant,” said Subrata Mukherjee, general secretary WBINTUC.

Meanwhile, the Centre has asked the state government to waive sales tax and electricity dues as well as a tax exemption for the next few years, to enable IISCO make a turnaround.

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