According to sources, the ministry may also commission a study for working out a viability proposal for one of the biggest shipyards in the country. Among other things, the proposed study would also look into the possibility of joint partnerships in all the areas of operation.

The study would spell out what needs to be done on both ship-building and ship repair fronts.

A ministry proposal for capital restructuring of HSL is already pending with the ministry of finance for almost two years. Under the plan, the ministry has asked for waiver of Rs 80-crore minimum alternative tax (MAT) plus an annual grant of Rs 30 crore for three years.

Capital restructuring can be incorporated in company's record only after receipt of approval of MAT exemption from the government.

In 1997, HSL's case was put up by the ministry of surface transport for capital restructuring. Theministry proposed waiver of government loan and interest to the tune of Rs 470.93 crore and conversion of government loan to the tune of Rs 120.20-crore into equity.

The ministry also provided for conversion of outstanding of State Bank of India's cash credit with interest thereon into term loan payable in equal yearly installment over a period of 10 years with an initial moratorium of three years. The said loan is secured against the government guarantee.According to sources, the restructuring was proposed at the behest of a multinational called Kaeverner. But two-year of dilly-dallying saw the Dutch company folding its operation all over the world.

Kaeverner offered to pick 40 per cent equity for $500 million provided the ministry wrote off the sick PSU's liabilities.

After re-examination of the net assets of the company, the ministry found that 40 per cent equity amounted to $1700 million.

The rehabilitation plan also extended 30 per cent ship-building subsidy by re-introducing the scheme witheffect from August 14, 1997 for a period of five years both for domestic and export orders of ocean going vessels.The subsidy is available to all public sector shipyards including those under the administrative control of the defence ministry.

Though the company has been making profit in ship repairs, it has been incurring losses in ship-building since 1980. Its ship-building capacity stands at 3.5 pioneer vessels of 21,500 DWT. It can undertake construction of ships of 50,000 DWT. It can take undertake repairs of ships up to 70,000 DWT. The main reasons for it being in red are cost-price gap, heavy interest burden on government and bank loans, excessive manpower and reduction in shipbuilding turnover for want of fresh orders.