As part of the restructuring of its capital and liabilities, SAIL had asked for waiver of around 75 per cent of its Rs 6,069-crore SDF loan (including accrued interest). But finance ministry officials said this may be difficult to approve due to "legal implications".

"We have to satisfy ourselves as to why SAIL should be treated as a special case. Once we decide to waive SAIL loans, it might open a Pandora's Box with other PSUs also asking for a similar facility," officials said.

The recast plan submitted by SAIL has not been able to "fully justify" the reasons for treating it as a special case, the officials said. In fact, theministry has asked the company to incorporate some "suitable clarifications" in this regard and a final decision will be taken only after the revised blueprint is studied carefully and the legal implications examined.

"The main issue is that there should be light at the end of the tunnel. What is the guarantee that SAIL would not come back to the Government for more money in, say, another two years?," the officials said.

Which means the ministry is not fully satisfied with the extent of cost-reduction measures initiated by SAIL. The steel giant which posted a Rs 1,573 crore loss last year saved Rs 732 crore in 1997-98 and Rs 902 crore in 1998-99 through cost-cutting. It has set a savings target of over Rs 1,000 crore through cost-cutting alone.

The finance ministry officials, however, said the Government, which holds around 85.8 per cent of SAIL's equity, is aware of the problems faced by the company and will take necessary steps to improve its bottomline. "SAIL is too important a company for us but wehave to see whether a package of the nature suggested by the company will solve the problem," the officials said.

SAIL had earlier claimed that the financial restructuring will help to improve the equity valuation. Besides the waiver of SDF loan, the company had also proposed that the Government's loan to IISCO routed through SAIL and the Rs 356-crore accrued interest on it should also be waived. Also, the interest waiver amounting to Rs 506 crore granted to IISCO in the past by SAIL on loans from its own sources is sought to be brought back to the books.