India Says Considering Steel Bailout Demand as Debt Mountsby
Steel ministry discussing plans with banks, official says
Government studying demand to extend safeguards on imports
India’s steel ministry is working with the nation’s banks and top policy advisers to consider the feasibility of a bailout package for indebted local metal producers, a top official said in an interview.
“We could have some clarity on the direction in a couple of weeks,” Aruna Sundararajan, the top-most bureaucrat in the steel ministry, said referring to industry’s demand for financial aid. “We’re looking into it.”
Losses at Indian steelmakers have widened as cheap imports from Asian countries including China forced them to cut prices. The flood of imports prompted the government to impose safeguard taxes in September and set a minimum import price last month. Sundararajan in December said the government was studying restructuring of loans.
The Indian steel industry has sought a moratorium on loan repayments, segregation of loans to allow converting a part of borrowings to redeemable preference shares or bonds, and a special financial instrument to help lower capital costs, Sundararajan said.
India is saddled with 8 trillion rupees ($118 billion) of stressed assets in its financial system with borrowing costs that are among in highest in the world. Steelmakers owed banks 3 trillion rupees, according to latest data from the Indian central bank.
Tata Steel Ltd., India’s biggest producer, rose 4.1 percent to 267.55 rupees in Mumbai, Steel authority of India Ltd. advanced 5.3 percent to 37.80 rupees while Jindal Steel & Power Ltd. climbed 2.6 percent to 57.30 rupees. The benchmark S&P BSE Sensex index gained 2 percent.
The government will also decide on extending safeguard duties on imports over the next couple of weeks, Sundararajan said. “The feedback after we put in safeguards has been good. The surge of imports seems to have been stemmed,” she said. “And companies are getting a better price for their products.”
Imports fell for a third month to 916,000 metric tons in January, according to provisional data from the Steel Ministry. Shipments jumped 24 percent to 9.31 million tons in the 10 months through January, it said.