This has been pointed out in the latest report by the Comptoller and Auditor General (CAG). According to the report "failure in proper investment of funds raised through bonds and parking of huge funds in banks and other institutions only facilitated the business interest of these institutions and the purpose of establishment of the Steel Bond was defeated".

In October 1994, the state government floated the Steel Bond aimed at providing infrastructure for the establishment of steel plants and equity participation in some of the steel projects. The government mopped up Rs 130 crore through private placement of 13,000 secured redeemable bonds of Rs 1 lakh each at a coupon rate of 15.5 per cent. The bond money isredeemable in four half-yearly installments between May 14, 2000 and November 14, 2001.

"Out of the total funds raised through the Steel Bond only Rs 10.75 crore was invested towards building infrastructure facilities as of March 1998. No amount was invested in equity of any venture as of June 1998," the report stated.

The report revealed that Rs 40 crore was given as loan at 16 per cent interest to Nilanchal Ispat Nigam Ltd (NINL) in 1995 for import of steel works and blast furnace from Italy, on condition that it would be converted into equity shares of the government at an appropriate time.

An interest of Rs 16.85 crore was payable by NINL till June 1998. As of September 1998, only Rs 2 crore was realised towards interest. The loan has not yet been converted into equity.