What were the strong points in favour of the steel sector pre-1990, which resulted in the steel sector accounting for a larger proportion of financial institutions total loan portfolio?
Mr. Gupta:Steel industry in pre 1990s was under government control, particularly the intergraded steel sector. But in the early 1990s, the sector was liberalized and was allowed enlisting by the private enterprises. So once the barrier had been opened up, there was some kind of euphoria. Entrepreneurs who either had strength or perceived strength or no strength at all came into the steel business. At that time steel market was also booming and people had faith in the sector. As a result of this too many companies were promoted. But practically all these companies didnt have financial muscles to take the kind of projects what they perceived. Since promoters were not pumping the money through equity, the projects were getting delayed resulting in 30-40% delay related additional project cost. Earlier all the financial institutions (FIs) believed that India has certain basic economic advantages to become a low cost steel producer in the world. Our raw materials cost and labour cost is one
