Russia govt pledges support to Mechel -paper

MOSCOW, Sept 3 (Reuters) - Russia's government may grant tax breaks to steel and coal giant Mechel (MTL.N) and has ordered state banks to study the possible purchase of 10 billion roubles ($315 million) of its bonds, Vedomosti said on Thursday.

The paper said Prime Minister Vladimir Putin had instructed Sberbank (SBER03.MM), VTB (VTBR.MM), Gazprombank and VEB as well as unnamed government ministries to look into buying Mechel bonds, citing minutes of a meeting Putin held last month in the eastern Siberian city of Mirny. [ID:nLL297891]

Mechel, one of the most heavily indebted Russian steel companies, said in August it would issue 10 billion roubles worth of bonds before the end of 2009 and another 30 billion roubles in 2010.

The company plans to use the proceeds from the issue to finance the development of the Elga Deposit in the Russian Far East. Vedomosti said the Energy and Finance Ministry will look into the possibility of providing tax breaks for the project.

Mechel, majority owned by billionaire Igor Zyuzin, is Russia's largest producer of coking coal for the steel industry.

In July last year, Mechel lost half its market value in three trading days after Putin twice attacked its pricing policy and sparked fears of a Kremlin-backed drive to punish the firm. [ID:nL8570708] ($1=31.77 Rouble) (Reporting by Maria Kiselyova; Editing by Mike Nesbit)