New Delhi, Aug 20: The Centre is considering channellising a part of the Rs 6,000-crore Steel Development Fund (SDF) kitty for modernising the Indian Iron and Steel Company Ltd (Iisco).

The SDF funds will be an alternative to rehabilitating the Steel Authority of India Ltd's (SAIL) sick subsidiary with Russian capital and knowhow. The proposal was discussed at a meeting between prime minister Inder Kumar Gujral and West Bengal chief minister Jyoti Basu on August 13.

Minister for steel Birendra Prasad Baishya and finance minister P Chidambaram also attended the meeting at the prime minister's residence, along with West Bengal finance minister Biplab Dasgupta and the state's minister for industrial reconstruction Mrinal Bannerjee.

The Russian steel consultant Tyazhpromexport had responded to SAIL's global tender, seeking an equity partner for modernising Iisco last year and had even submitted a firm proposal at a substantially pruned project cost.

The Russian company had offered to pick up nearly 37 per cent equity in a joint venture, in which SAIL would retain a majority stake of 51 per cent. Tyazhpromexport had proposed funding its contribution to the Iisco equity from the rupee debt repayment account.

An alternative proposal became necessary when a consensus did not evolve between New Delhi and Moscow on whether or not the rupee debt, left over from the days of rupee-rouble trade, could be released to fund the project. The rupee debt has, so far, been repaid through commodity exports like leather or tea.

A decision was taken at the Indo-Russian joint commission in Moscow that the escrow account would be used to fund infrastructure projects as well.

The finance ministry at home and its counterpart in Moscow could not, however, decide whether core sector industries like steel qualified as infrastructure projects. The long impasse between government quarters that were pressing for release of the rupee debt funds and those that had reservations against it, only setback the long-pending modernisation project of the once premier steel plant in West Bengal.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.