The recommendations should form the basis of mid-term tariff concessions for steel producers, most of whom are struggling to make ends meet this year. The centre is known to have devised a floor price for steel imports, beyond which a duty will be imposed.

The committee, comprising representatives from the finance, commerce and steel ministries, particularly emphasises the need for a ``fast-track mechanism'' to check ``dumping'' by overseas steel producers. The working group, headed by special secretary, banking, CM Vasudev, conferred with financial institutions like the Industrial Development Bank of India (IDBI) and industry brass, represented by the Confederation of Indian Industry (CII), onOctober 8 and October 13.

It submitted its report on October 29, a copy of which The Financial Express possesses. The panel feels that the slowdown in the steel industry stems from the ``sluggish growth in domestic demand from major steel-intensive segments like capital goods, consumer durables, automobiles, housing and construction activities''.

Having identified the blight, the panel set about devising a booster dose, ranging from duty concessions to stimulate demand for some grades of steel, to a directive from the Reserve Bank of India (RBI) to banks to meet the working-capital requirements of primary steel producers. Producers like SAIL, Tisco and Rashtriya Ispat Nigam have all shown a fall in profitability because of the dipping margins in steel sales.

SAIL posted a loss of Rs 616.91 crore in the first half, while Tisco's net fell to Rs 96 crore, from Rs 176 crore in the first six months of last year.

The drop in returns on sales has been despite a rise in volumes, indicating the extentof discounts granted to customers over the marked price to push sales. An alternative marketing instrument has been a suppliers' credit to customers. The panel advises the RBI to ask banks to ``review the working-capital support to the primary producers, who are finding it difficult to extend credit to their customers, and take appropriate measures consistent with their commercial judgment''.

To financial institutions, which have now turned chary of lending to new steel projects, the panel has recommended caution. The report says that while the group recognises that any loan restructuring, or provision of additional assistance from FIs to any promoter should be based purely on commercial considerations and assessment of the institutions concerned, the prudential norms on exposure and asset classification should be strictly enforced.

As on March 31, 1998, IDBI's outstanding assets to the iron and steel industry was Rs 4,719 crore for 157 units, of which 15 per cent qualifies as non-performing assets(NPAs). Of the Industrial Credit & Investment Corporation of India's (ICICI) exposure to the steel industry of Rs 5,587 crore, 10 per cent constitutes NPAs.

The working group advises FIs to ensure that there is no diversion of funds from the projects, for which financial assistance was extended. ``Any instance of this should not be condoned or ignored,'' it says, adding ``the need for financial institutions to exercise extreme circumspection in dealing with restructuring or additional assistance (to promoters of steel projects) cannot be over emphasised.''

The booster dose for the industry comes in a package targeted at stimulating demand, promoting exports, helping steel producers adjust to competition from imports, and improving domestic steel's competitiveness. The panel proposes exempting steel-making raw materials not available in the country (like nickel and metallurgical coke) from the special customs duties of 2 per cent and 3 per cent, and the special additional duty of 4 per cent.

To promotesteel exports, which was only 9.3 per cent of domestic output last year (at 2.10 million tonnes), against 14.5 per cent in 1993-94, the Vasudev panel suggests rationalisation of the Duty Entitlement Passbook Scheme (DEPB) rates. The import-duty concession for raw materials for steel meant for exports should be calculated on ``actual value addition", the panel says.

It also suggests extending the DEPB concessions to deemed exports, or steel exports, by land routes to neighbouring countries like Nepal. The export push has to match a check on imports to whittle down the building inventories of unsold steel at home.

The panel acknowledges that the home industry is yet to ``adjust itself to the restructuring'' required to meet ``global challenges''. It, therefore, suggests measures for tariff protections like converting the ad-valorem rate of duty into fixed duties on items like hot-rolled coils, cold-rolled coils, electrical sheets and tinplates.

The working group calls for a ``combination of measures''like levying a special import duty on imports of ``seconds'' and ``defectives'', and raising import duty on some grades of steel (including ``seconds'') up to the World Trade Organisation-bound rate. The progressive cutback in import duties since the economic reforms in 1991 have brought the tariff barrier on steel (now roughly 25 per cent) far below the WTO-bound rate.

The commerce ministry and the director general of foreign trade (who represented on the panel) have been advised to remove ``seconds'' and ``defectives'' imported below a specified floor price from the open general licence (OGL). Imports of finished steel ``seconds'' and ``defectives'' jumped to 4.10 lakh tonnes last year, from 3.2 lakh tonne in 1995-96.

The working group finally calls for a time-bound action plan for implementing measures suggested by the Ninth Plan Working Group on Steel for improving plants' cost efficiency. The panel had recommended steps like efficient operation of blast furnaces, cutting down on coke rate, andimproving the quality and productivity of hot metal.

The short-term palliatives in the package for the steel industry should come in the form of tariff notifications from the revenue department, which is expected soon.