The total liability of the private sector steel companies with the institutions is estimated to be over Rs 20,000 crore, forcing the institutions to call an emergency meeting in Mumbai on Saturday to discuss a bailout package. The meeting will be attended by the top brass of all financial institutions.

Among the other major borrowers are Lloyds Steel with Rs 1171.25 crore, Malvika Steel (Rs 934.99 crore), Usha Ispat (Rs 433.33 crore) and Rajinder Steel (Rs 403.99 crore).

Tisco, which has a total borrowing of Rs 4578.98 crore, is believed to have decided to refrain from requesting any relief from the FIs in Saturday's meeting.

Sources said the financial institutions have in principle decided not to extend any fresh funds to the steel companies. The sources said the institutions may decide totake a soft stand on resceduling of loans provided the government agrees to provide duty reliefs to the steel companies.

Sources further said that with such heavy investment made in the sector it would be difficult to press for an alternative management as, it is unlikely that any investor would be ready for investment of such magnitude.

Institutions are also considering the fact that steel industry is currently facing a slump owing to recession and may decide to work out some need-based packages for them, sources added.

While, discussing the policy matter regarding steel the FIs may also take up proposals put in by some of the companies including, that of Essar Steel, Ispat Industries, Malvika Steel, Usha Ispat, Rajinder Steel, Lloyds Steel and Jindal Vijaynagar Steel. Some of the companies are seeking guarantee for raising ECBs to retire part of their existing outstandings.

This is not the first time that institutions are rescheduling the loans of such companies. Institutions are planning torestructure the loans of Lloyd Steel, Ispat, Jindal, Usha Ispat, Rajinder Steel and others. Unit Trust of India (UTI) had recently restructured the redemption period for non-convertible debentures from 2001 to 2005.

However, a section of the corporate sector, especially the textiles, is agitated over the policy of institutions to bail out only the steel sector. ``The situation in the textile sector is even worse than steel sector. Hundreds of textile mills are lying closed for want of cash. These institutions have not done much in our case. Their eagerness to work out bail-out packages to steel companies is not understandable,'' said the chief executive of a textile company.

Union steel secretary A K Basu had gone on record last week saying that FIs should consider rescheduling loan repayment in order to give the upcoming steel plants a longer period for repayments. However, merchant bankers are skeptical about the rescheduling plans of FIs. "There was a failure in carrying out due diligence, projectappraisal especially in terms of demand and production. When there is poor demand, why do you encourage more capacities?'' asked a merchant banker.

As many as 19 new major steel projects - representing an aggregate capacity of around 13 million tonnes and a total investment commitment of over Rs 25,000 crore - are coming up in the country.