In a significant step towards providing preferential credit for steel projects which will also help in funding the capacity expansion in the sector, the Government is examining the possibility of formulating a dedicated financing institution on the lines of Power Finance Corporation (PFC) for the steel industry. According to official sources, the Steel Ministry has set up a committee headed by the Chairman of Steel Authority of India ltd (SAIl) C S Verma, which will discuss the pros and cons of forming such a body. The panel is expected to submit its report on the matter by September 30, 2015.
During the UPA Government's regime, the idea of setting up a funding institution for the steel sector had been mooted by SAIl, however it had been shelved by the Union Steel Ministry on the lines that sourcing funds for steel projects was not a problem. The view of the Centre at that time was that problems like delay in acquisition of land, sourcing water and essential mineral linkages for projects were more pressing issues, and, therefore, a funding body for the sector on the lines of PFC was not required.
Now, however, sources added, owing to the NDA Government's keenness to fast track major infrastructure projects as well as to start Greenfield projects, especially in the steel sector, the need for setting up a funding body could be discussed afresh. This should also be seen in the light of the fact that the Steel Ministry recently has recently announced four Greenfield projects in the states of Jharkhand, Chhattisgarh, Odisha and Karnataka. Under this, steel plants will be set up in the next three to four years, in association with SAIl and NMDC as well as the respective states. These projects will ramp up the country's steel production beyond the 100 million tonnes per annum mark.
Moreover, the Parliamentary Standing Committee on Coal and Steel, in a report which it had submitted in Parliament last month, had also asked the Government to seriously think about setting up such a funding mechanism. While understanding the view that the Government should take all out steps to remove the bottlenecks like non-availability of land, water and mineral linkage, the Committee recommended in its report that the earlier proposal for setting up a funding body, which had been mooted by SAIl, should be given a fresh look by the Government for arranging preferential credit for the steel sector, as this will also enhance national steel production.
Incidentally CS Verma himself had strongly advocated for having such a body during the UPA Government's regime. He had urged the then Steel Minister Beni Prasad Verma for setting up a funding mechanism similar in nature to PFC for the steel sector, as this kind of a body would help in the long run as India requires around $200 billion to treble its steel-making capacity to 300 million tonnes per annum. Currently India produces 84 million tonnes of steel per annum. He had said that this exercise would entail coming together of banks and financial institutions to pool in their resources for setting up a dedicated body to finance these projects on the lines of PFC.