Wednesday, January 19, 2022
Andhra PradeshAndhra Pradesh CM Jagan urges PM Modi to save Vizag Steel Plant

Andhra Pradesh CM Jagan urges PM Modi to save Vizag Steel Plant

Published: 7th Feb 2021 10:50 am

Amaravati: Andhra Pradesh Chief Minister YS Jaganmohan Reddy has made a fervent appeal to Prime Minister Narendra Modi to reconsider the disinvestment plans of RINL Visakhapatnam and explore other opportunities to put the plant back on track, with an assurance that Andhra Pradesh government would closely work with the Government of India under Modi’s leadership in reviving the plant for unlocking greater value to the society and in particular to the people of Andhra Pradesh.

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In a letter addressed to the Prime Minister on Saturday, he referred to the recent decision of the Cabinet Committee on Economic Affairs (CCEA) which had given in-principle approval for 100% strategic disinvestment of Government of India’s shareholding in Rashtriya Ispat Nigam Ltd.,(RINL) Visakhapatnam, along with management control by way of privatisation and the news items being published in the media about the Union Cabinet’s clearance of the same has become a point of discussion among the public in Andhra Pradesh and a cause of concern
to the state.

“As you are aware Rashtriya Ispat Nigam Limited (RINL), the corporate entity of Visakhapatnam Steel Plant (VSP), is a Navratna Company under the Ministry of Steel, Govt. of India. It is the largest public sector industrial unit in the state creating employment opportunities for close to around 20,000 people directly and many other indirect employment opportunities in the city of Vishakhapatnam. It is India’s first shore-based integrated Steel Plant and a producer of long steel products catering to the requirements of the Construction, Infrastructure, Manufacturing & Automobile sectors. This plant is realised only after many sacrifices by our people. The people of my state rallied for the Visakhapatnam Steel Plant in which 32 people have laid down their lives. On 17th April 1970, the then Prime Minister of India, announced the Government’s decision to establish a steel plant at Visakhapatnam culminating the decade-long public
agitation “Visakha Ukku-Andhrula Hakku” in the undivided Andhra Pradesh,” he recalled.

In this context, Jaganmohan Reddy also drew the attention of Modi to the fact that the plant had a good performance between 2002 to 2015 earning profits with positive net worth. The plant had pragmatically turned-around in 2002 after being reported to BIFR as a sick company. The company had around 19700 acres of land at present and the value of these lands alone could exceed one lakh crore rupees due to the location of the plant in the urban area and rapidly expanding urban sprawl. RINL currently had a capacity of 7.3 million tonnes and had taken up plant modernisation and capacity expansion recently which made the plant borrow loans from banks to take up the expansion.

Owing to the unfavourable steel cycle globally, the company was making losses since 2014-15 and was finding it difficult to service the debt. One of the major structural issues that also led to high cost of production is the absence of captive mine affecting the profitability, he pointed out.

Exuding confidence that the plant would again become a profitable venture given some support from the Centre instead of taking the disinvestment route– by some turnaround measures such as allotting captive iron ore mines to bring down the input costs, swapping high cost debt with low cost debt, and converting debt into equity through equity conversion, he urged the Prime Minister to consider measures for revival of RINL which included continuing operations to achieve turn around, captive iron ore mine to reduce input costs, financial restructuring which includes conversion of short term loans along with long term loans into equity taking off repayment pressures and interest burden.

The Chief Minister noted the high cost debt which was actually Rs. 22,000 crore, was being serviced at interest rates as high as 14% and conversion of these loans into equity by the banks would remove the interest burden totally and listing the entity (RINL, Vizag) on the stock exchange giving the banks exit option through the stock exchange route through general public could also be explored. These measures could ease the burden of debt servicing and improve the financial sustainability of the Navratna company, he opined.

The steel plant stood as a testimony to the will of Telugu people and it was continued as an icon of Telugu achievement in their collective psyche till date, the Chief Minister stated, and assured the Centre that the Government of Andhra Pradesh was ready to work with the Ministry of Steel to protect the jewel of the state.

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