The UK and Welsch governments are reviewing Indian steel major Tata Steel's request for a 500 million pound bailout package to tide over the blow from the Coronavirus pandemic.

CNBC-TV18 learns from sources that the governments are unlikely to approve the entire amount Tata Steel.

"The UK and Welsh governments are closely looking into the matter and have started a formal review of the request;" said an official aware of the development.

"It is very unlikely however that the amount sought by the company will be cleared as the governments believe that it is too steep a figure. Also, if it agrees to the amount it will set a precedent for other companies in the sector," the official said.

Currently, the UK government has set a cap of 50 million pounds on loans given to large companies hit by the COVID 19 pandemic under the CLBILS (Coronavirus Large Business Interruption Loan Scheme).

"If at all the government is looking at extending that for Tata Steel, it is very unlikely that Tata Steel will get the amount it has sought," the official said.

Currently, Tata Steel employs 8385 people across the United Kingdom. Of this 4000 work out of Port Talbot in South Wales.Aberavon Labor MP, Stephen Kinnock is supporting Tata Steel's demand.

Aberavonn is a town in the county of Port Talbot. Kinnock has even written to Rishi Sunak, Chancellor of the Exchequer, calling Tata Steel's Port Talbot plant the 'beating heart of the community'.

"Tata Steel employs 4000 highly skilled and relatively well paid men and women at the Port Talbot works, and tens of thousands work in the supply chains, I am sure I dont need to point out that if there were to be a catastrophic collapse and these jobs were to be lost, then the cost to the British Taxpayer would be astronomical," Kinnock said in the letter to Sunak.

The letter then went on to talk about the need to extend the CLBILS.

"The CLBILS is subject to an arbitrary cap of 50 million pounds which falls far short of scale of support that Tata Steel requires. Instead the government should follow best practices in competitor countries like France and Germany, where steel companies are getting access to the support they need based on their turnover rather than an arbitrary cap."

When Kinnock raised this point in the UK Parliament, Dominic Raab the acting PM and UK Foreign Secretary said: "I know that the Chancellor is looking carefully at the steel sector in the hon, Gentleman's constituency, and at all those who are not directly befitting from this particular scheme to ensure that in the round we are providing the measures that we need in a targeted way to support all the different crucial elements of the economy."

Discussions are currently underway between Tata Steel UK and the Deaprtment of Treasury and Departments of Business, Energy and Industrial Strategy.

Tata Steel did not respond to CNBC-TV18's query on the subject of bail out.

A formal statement from the UK government spokesperson said: "The government has put together far reaching package of support to help businesses through the pandemic. We continue to engage with businesses across sectors including those in steel industry."

First Published:Apr 28, 2020 11:51 AM IST