VIJAYAWADA: Andhra Pradesh Chief Minister YS Jagan Mohan Reddy on Saturday dashed off a letter to Prime Minister Narendra Modi urging him to reconsider the disinvestment of Visakhapatnam Steel Plant and explore other options to put the plant back on track. The Andhra Pradesh government will cooperate with the Centre to put the plant back on track and the State and the Centre together can revive the plant for unlocking greater value to the society and in particular to the people of AP, he said.
In the wake of in principle approval of the Cabinet Committee on Economic Affairs (CCEA) for 100 per cent strategic disinvestment of the VSP, Jagan apprised the Prime Minister of the sacrifices made by the people of the State to get the steel plant set up in Visakhapatnam.
“This plant is realised only after many sacrifices by our people. The people of AP rallied for the steel plant in which 32 people had laid down their lives. On April 17, 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 erstwhile undivided Andhra Pradesh,” Jagan said.
Drawing the attention of the Prime Minister to the fact that the plant had made a turn around in 2002 after being reported to the Board for Industrial and Financial Reconstruction (BIFR), he said the plant performed well between 2002 and 2015 earning profits. The RINL has around 19,700 acres of land at present and the market value of the land alone is more than one lakh crore rupees due to the location of the plant in urban area and rapidly expanding urban sprawl.
RINL currently has a production capacity of 7.3 million tonnes. It had taken up plant modernisation and capacity expansion, which made the plant borrow loans from banks. Owing to unfavourable steel cycle globally, the RINL has been incurring losses since 2014-15 and it is finding it difficult to service the debt. One of the major structural issue that also leads to high cost of production is the absence of captive iron ore mines thereby affecting its profitability,” the Chief Minister said.
Emphasising that the plant will again become a profitable venture given some support from the Centre instead of disinvesting it, Jagan urged the Centre to take 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 infusion.
Urging the Prime Minister to consider continuing operations to achieve turnaround, Jagan said, “Like all the sectors of economy, the steel sector is also seeing a V-shaped recovery. The RINL has achieved the highest ever capacity utilisation of 6.3 MTPA against the capacity of 7.3 MTPA from December 2020 and started making a monthly profit of close to `200 crore. Continuing this performance for a further period of two years will help the financial situation immensely.’’
On allocation of captive mines to the plant, Jagan said currently the RINL is purchasing iron ore from NMDC Bailadila mines at market price. “This has put the RINL at a cost disadvantage of around `5,260 per metric tonne of steel (at ore level). Many of its competitors have captive mines for more than 60 per cent of their requirement and buy only the rest from NMDC. Even SAIL has own captive mines with reserves of iron ore sufficient for 200 years. This excess cost of iron ore has cost implications of more than `3,472 crores for RINL,’’ Jagan pointed out and added that it is essential to create a level playing field for all the players and allotment of captive mines to the RINL will help tide over this cost disadvantage.
On the issue of financial restructuring, Jagan said short term loans can be converted into long term loans taking off repayment pressure and interest burden. “The high cost debts can be swapped with low cost debts. Conversion of loans into equity by the banks so as to remove the interest burden totally and listing the entity on the stock exchange giving the banks exit option through the stock exchange to general public may also be explored,’’ Jagan said.