The domestic steel industry witnessed substantial credit downgrades in the calendar year 1999-2000, despite improvement in prices and demand.The primary reason, for downgrading several companies in this sector, has been the unfavourable capital structure of most players brought upon by debt funding of fixed assets.

The level of debt has increased to such a large extent that debt servicing through internal accruals has become difficult, Crisil said in a statement here on Thursday.

"Due to the typical tenure of debt instruments in India and reliance on short-term debt, several companies are looking at large debt repayments at a time when the industry is sluggish and refinancing for steel companies is becoming difficult", it added.

In a few cases the level of debt is so high that it precludes improvement in capital structure and credit worthiness despite the improvement in steel prices. Crisil also noted that Tisco is still rated `AA+', reflecting the company's financial strength in times when it has been able to weather difficult conditions in the sector through robust operational cash flows and timely divestment of non-core investments.

In summary, Crisil states that the long term outlook for the steel sector is favourable. Before, this crystallises, however, there is a period of uncertainty for the domestic steel companies due to the fragmented nature of competition.The downgrade in ratings reflects Crisil's concern over the companies' ability to meet their debt obligations in a timely manner through this period of uncertanity, especially those with large levels of borrowings and facing redemption pressures, it said.

Need for forces in Central power units in N-E
The power ministers of North-Eastern states have called for adequate deployment of security personnel in the Central power undertakings located in the region in view of recent attacks by extremists, official sources said here on Thursday. The ministers, at the just-concluded 47th North-Eastern Regional Electricity Board (NEREB) here, resolved to urge the Centre to provide adequate security forces.