Hyderabad: Chief Minister of Andhra Pradesh YS Jaganmohan Reddy has made a fervent appeal to Prime Minister Narendra Modi to rethink RINL Visakhapatnam’s disinvestment plans and explore other opportunities to bring the plant back on track, assuring that the government of Andhra Pradesh will work closely 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.
In a letter addressed to the Prime Minister, he referred to the recent decision of the Cabinet Committee on Economic Affairs (CCEA), which approved in principle the 100% strategic disinvestment of the shareholding of the Government of India in RashtriyaIspat Nigam Ltd.,(RINL) Visakhapatnam, along with management control through privatisation and news items reported in the media about the clearance of the Union Cabinet, has become a topic of public discourse in Andhra Pradesh and a cause for concern among the public towards the economy.
“As you know, RashtriyaIspat Nigam Limited (RINL), a Visakhapatnam Steel Plant (VSP) corporate entity, is a Navratna company under the Ministry of Steel, Govt. Around India. It is the state’s largest public sector industrial unit that directly creates employment opportunities for nearly 20,000 individuals and many other indirect employment opportunities in Visakhapatnam District.It is India’s first integrated steel plant based on shore and a manufacturer of long steel products that meet the requirements of the sectors of construction, infrastructure, manufacturing & automotive. Only after many sacrifices by our people is this plant realized. The people of my state gathered at a steel plant in Visakhapatnam, where 32 people gave their lives. “The then Prime Minister of India announced on 17 April 1970 the government’s decision to set up a steel plant in Visakhapatnam, culminating in the decade-long “VisakhaUkku-AndhrulaHakku” public agitation in the undivided Andhra Pradesh,” he recalled.
In this sense, Jagan Mohan Reddy also drew Modi’s attention to the fact that the plant performed well between 2002 and 2015, earning a positive net profit. After being identified to BIFR as a sick enterprise, the plant was pragmatically turned around in 2002. At present, the company had about 19700 acres of land, and due to the position of the plant in the metropolitan area and rapidly expanding urban sprawl, the valuation of these lands alone could surpass one lakh crore rupees. RINL currently has a capacity of 7.3 million tonnes and has recently taken up plant modernization and capacity expansion, which has allowed banks to borrow loans from the plant to take over the plant expansion.
The company has been making losses since 2014-15 due to the unfavorable steel cycle globally and has found it difficult to service the debt. The absence of a captive mine affecting profitability is one of the major structural problems that have led to high production costs, he pointed out.
Exuding trust that, given some help from the Centre instead of following the disinvestment path, the plant will once again become a profitable company, through some turnaround steps such as allocating captive iron ore mines to minimize input costs, exchanging high cost debt with low cost debt, and turning debt into equity through equity conversion, he urged the Prime Minister to consider steps for the revival of RINL, including ongoing turn-around operations, captive iron ore mining to minimize input costs, financial restructuring involving the conversion of short-term loans and long-term loans into equity, taking off repayment burdens and the burden of interest.
The Chief Minister noted that the high cost debt, which was actually Rs. 22,000 crore, was serviced at interest rates as high as 14 percent and the banks’ conversion of these loans into equity would fully eliminate the interest burden and list the entity on the stock exchange (RINL, Vizag) giving the banks the option of exiting through the stock exchange route through the general public could also be explored.These initiatives could ease the debt servicing burden and boost the financial health of the business in Navratna, he said.The steel plant stood as a testimony to the will of the Telugu people and it remained in their collective psyche as a symbol of Telugu achievement to date, the Chief Minister said, and assured the Centre that the Government of Andhra Pradesh was prepared to work with the Steel Ministry to protect the state’s jewel.