In ArcelorMittal’s bid for Essar Steel, Gujarat may lose ₹1,150 cr
Gujarat government is set to lose as much as ₹1,150 crore if the dedicated bankruptcy court upholds the Committee of Creditors’ recommendation to accept the resolution plan of ArcelorMittal Netherlands BV to acquire Essar Steel Ltd, said two senior officials close to the development.
These dues are classified as operational creditors and ArcelorMittal’s proposal has not made any provision for payment to such creditors, they said, requesting anonymity.
Essar Steel owes about ₹1,150 crore to a clutch of Gujarat government companies including ₹872 crore to Gujarat Energy Transmission Corp. Ltd.
According to details of the resolution plan listed by the Resolution Professional on Essar Steel’s website, the dues pertain to various agencies of the Gujarat government including collector of electricity duty and state maritime regulator, sales tax department and local authorities.
The resolution plan envisages upfront payment of ₹42,000 crore to lenders and additional ₹8,000 crore towards capital expenditure. The total admitted claims of operational creditors totals ₹4,995 crore. ArcelorMittal has offered to settle it at ₹214 crore.
On 25 October, more than 92% of creditors of Essar Steel voted in favour of handing over the debtladen company to ArcelorMittal.
The resolution professional on October 30 filed ArcelorMittal’s plan with the Ahmedabad Bench of the National Company Law Tribunal (NCLT).
After completion, ArcelorMittal will jointly own and operate ESIL in partnership with Nippon Steel & Sumitomo Metal Corp., Japan’s largest steel producer and the third-largest steel producer in the world, in line with the joint venture formation agreement.
Meanwhile, the promoters of Essar Steel, the Ruia family, submitted a proposal to the CoC on October 25 agreeing to pay a total of ₹54,389 crore to all creditors.
The proposal submitted by the shareholders and board of Essar Steel has provided for paying the dues to operational creditor and that of the government and its agencies in full, said one of the two officials cited above.
“Since the revenues of the government are at stake, it needs to be seen whether these entities take up the issue with the CoC or with NCLT to protect their interest. The state CAG would also be watching the developments,” he said. A Gujarat government official said they are aware of the matter and will soon decide on the appropriate course of action.
Essar Steel is an integrated steel producer with an annual production capacity of 10 million tonnes.