Andhra Pradesh Chief Minister YS Jagan Mohan Reddy on Saturday wrote to Prime Minister Narendra Modi requesting him to reconsider the disinvestment plans of RINL (Rashtriya Ispat Nigam Ltd) Visakhapatnam and explore other opportunities to put the plant back on track.
In a letter, Reddy said the recent decision of the Cabinet Committee on Economic Affairs (CCEA) which has given in-principle approval for 100 per cent strategic disinvestment of the government of India's shareholding in RINL, Visakhapatnam, along with management control by way of privatization has become a cause of concern for the state government.
"RINL 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," he stated.
The Chief Minister recalled that the plant had a good performance between 2002 to 2015 earning profits with positive net worth but had pragmatically turned-around in 2002 after being reported to Board for Industrial and Financial Reconstruction (BIFR) as a sick company.
"The company has around 19,700 acres of land currently and the valuation 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," Reddy wrote.
The Chief Minister noted that RINL currently has a capacity of 7.3 million tonnes and has 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 leads to the high cost of production is the absence of captive mine thereby affecting the profitability," he said further.
Reddy pressed that the plant will again become a profitable venture given some support from the Government of India 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."
"I request you to consider the following measures for revival of RINL Visakhapatnam," he said.He suggested that the operation of the plant can continue to achieve the turnaround, and said "As with all the sectors of the economy, the steel sector is also seeing a V-Shaped recovery. RINL has achieved the highest ever capacity utilization of 6.3 MTPA against the capacity of 7.3 MTPA from December 2020 and started making a monthly profit of close to Rs 200 crores. Continuing this performance for a further period of two years will help the financial situation immensely."
He also said that having captive iron ores mine of its own will reduce input costs for RINL. Reddy said currently, RINL is purchasing iron ore from NMDC Bailadila mines at market price, which has put the RINL at a cost disadvantage of around Rs 5,260 per MT of steel (at ore level)."Many of its competitors have captive mines for more than 60 per cent of their requirements and buy only the rest from NMDC. Even SAIL has its own captive mines with reserves of iron ore sufficient for 200 years. This excess cost of iron ore has cost implications of more than Rs. 3,472 crores for RINL. It is essential to create a level playing field for all the players and hence allotment of captive mines for RINL will help tide over this cost disadvantage. Orissa is blessed with iron ore and the captive mine in Orissa State will go a long way in reviving the plant," he stated.
The Andhra chief minister added that financial restructuring can also help the plant, by converting the short term loans along with long term loans into equity taking off repayment pressures and interest burden.
"The high-cost debt which is actually Rs. 22,000 cr is being serviced at interest rates as high as 14 per cent. Conversion of these loans into equity by the banks so as to 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 may also be explored. These measures could ease the burden of debt servicing and improve the financial sustainability," he said.
Reddy added that the steel plant stands as a testimony to the will of the Telugu people and it is continued as an icon of Telugu achievement in our collective psyche to date, and added that the state government is ready to work with the Ministry of steel to protect RINL.
"Therefore, I request you to kindly reconsider the disinvestment plans of RINL Visakhapatnam and explore other opportunities to put the plant back on track. I assure you that Andhra Pradesh Government will closely work with the Government of India under your able leadership in making this happen and together we can revive the plant for unlocking the greater value to the society and in particular to the people of Andhra Pradesh," he stated.
( With inputs from ANI )
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