"The ministry is considering their demands but is in a dilemma. Even if it agrees to provide loans to new entrants, there will be no money to offer from the SDF as the fund is now only on paper. The money is already with main producers," a senior steel industry official said.

New entrants -- Ispat Industries, Essar Steel, Lloyds Steel and Jindal Vijaynagar Steel -- have demanded access to loans from the fund. Some of them have even threatened to go to court if they are denied the facility.

Since the formation of the fund in 1979, the facility has been enjoyed by former integrated steel producers -- Tisco, the government-owned Steel Authority of India and Indian Iron & Steel Co. Since 1990, Rashtriya Ispat Nigam has also joined the list.

SDF loans attract an average interest of only 6 per cent,which is far less than what is charged by banks and institutions.

"The ministry opened a Pandora's box while attempting to provide money from SDF to SAIL's ailing subsidiary Iisco. Now they can't close its lid," said the official.

A senior official of one of the new companies said the fund was created for the development of steel industry, which includes all steel producers. "Why should we be denied the right?," he asked.

Steel secretary Ashok Basu was not available for comment as he is away in the US. Development commissioner of Iron & Steel RK Prasannan, who heads the fund, declined to comment.

The SDF, which has a corpus of more than Rs 6,500 crore, has been collected from consumers via main steel producers. The funds came from three sources: a surcharge of Rs 100 per tonne on certain steel items produced by integrated steel plants, the billet re-rollers' fund and import pool price equalisation fund.

The new entrants are contesting the main producers' argument that the fund was built up withtheir contributions, so only they should get its benefits.

"Steel surcharge is like sales tax and excise duties which are collected by others on behalf of the Government. Hence, there is no legal merit in the claims of the old producers that the fund belongs to them," an official of a new steel company said.

"The old players talk much of level playing-field when they are faced with competition from abroad. But when the question of sharing the fund corpus comes, they tend to forget that we should also need to be provided with a level playing-field," he said.

Many in the steel ministry however agree that main producers have played a very positive and commendable role over the years in developing social and industrial infrastructure like townships, schools, hospitals and other civic amenities for their employees.

"Expenditure on these areas eats away a chunk of the profits of main producers and hence they deserve such benefits like soft loans from SDF. On the other hand, none of the new producers didanything in these areas," said a steel-ministry official.