Rashtriya Ispat Nigam Limited (RINL), the corporate entity of Visakhapatnam Steel Plant commonly known as “Vizag Steel” is a Navratna Public Sector Enterprise under the Ministry of Steel. The plant is spread over a mammoth area of about 20,000 acres and has an installed capacity of 7.3MTPA. It is located in the vicinity of the Visakhapatnam city, the executive capital of Andhra Pradesh, which is known as the “City of Destiny” because of its majestic scenic beauty.
Vizag Steel Plant is blessed with a logistic edge owing to is superior connectivity via roads, rails and sea. The plant takes pride in the fact that it is the first off-shore based integrated steel plant in the country. It employs around 20,000 permanent employees and 15000 contract workers. It provides indirect employment to about 5 lakh inhabitants of Vizag and is directly responsible for the livelihood of more than 70,000 people. The company had played a significant role in developing the economy of the adjacent area like Gajuwaka, Kurmannapalem, Aganampudi etc leading to significant growth in per capita income in Gajuwaka assembly with an estimated value of around 4,00,000, the average per capita income of the country being 1,34,432.
History:
The foundation stone of VSP was laid in 1971 by late Smt. Indira Gandhi after a long-term agitation by the people of Visakhapatnam. The agitation claimed about 32 lives. The people rallied with the slogan “Visakha Ukku Andralu Hakku” which meant that Vizag Steel is Andhra’s right. The project got sanctioned in 1982 and the plant got finally commissioned in 1992. Although the plant suffered losses and was referred to the Board for Industrial and Financial Reconstruction (BIFR). But it took major turnaround and started garnering profits in 2002.
VSP is incurring losses because of the lack of captive iron ore and coal mines. Companies like SAIL procures more than 60 per cent of the raw materials from its captive mines which helps them to lower down the input costs.
Above and all, the plant took a huge amount of loans for the expansion of its existing facilities to scale up the production capacity from 3.2MTPA to 6.3MTPA and subsequently to 7.3MTPA. However, delay in the project materialization/commissioning due to various problems like a blast in BOF converter in SMS-2 in 2012 impacted heavily in their burden of interest. Moreover, the company came under immense pressure due to headwinds in the steel market since 2014-15, further adding to its woes. The company started incurring heavy losses thereafter. It took some time to stabilize but ramped up its production at an alarming pace to reach production output of 6.3 MTPA in 2019 and is poised to reach it’s expanded potential of 7.3 MTPA by next year.
Agitations:
Union Budget 2021 underlined Centre’s intent for disinvestment of public sector enterprises and has clearly led out plans to strategically disinvest major PSU’s in the country. The government is willing to have only a few PSU’s under the arms of the government which are categorised as the strategic sectors. It has set a target of 1.75 lakh crore from stake sale in PSU. VSP came under the radar after such declaration. Subsequently, the Cabinet Committee of Economic Affairs cleared the proposal for the privatisation of the plant.
Amitabh Kant, CEO of NITI Ayog believes that asset monetisation will lead to increased private investments in the country and will serve as key financing option for new infrastructure construction.
Political parties in Andhra Pradesh (AP) are enraged by this Centre’s decision. The opposition Telugu Desam Party (TDP), Left parties, several trade unions, people’s organisations and members of the public are launching an agitation and vehemently opposing such decision.
Ganta Srinivasa Rao, a TDP lawmaker sent his resignation in support of the protest against such move. He wants all the MLA’s and MP’s to put pressure on the Centre. Additionally, TDP leader Palla Srinivasa Rao started a fast-unto-death resolution with a clear-cut demand for the Centre to withdraw its proposal.
YSRCP general secretary V Vijay Sai Reddy lawmakers had also assured that they will meet Union home minister Amit Shah and submit a representation against the privatisation.
A huge bike rally was carried out in support of the protest, further complemented by huge gathering, dharna, protests and meeting outside the plant premises with people chanting out slogans: “Visakha Ukku Andralu Hakku”.
Amid growing outrage, AP Chief minister Jagan Mohan Reddy had written to Prime Minister Narendra Modi requesting him to reconsider Centre’s disinvestment plans. He had given several financial restructuring proposals like conversion of long and short-term loans to equity, allotment of mines to the plant etc.
However, many leaders believe that the delay in privatisation will lead to further borrowing of loans and an increase in interest burden will hamper the future prospects of the company.
Future of the Plant:
Union Steel Minister Dharmendra Pradhan said that POSCO had shown interest in setting up a greenfield steel plant on the land of RINL at an estimated project cost of Rs 30,000 crore. An MoU was signed between POSCO and RINL in October 2019. As per the MoU, POSCO had shown interest in having at least 50 per cent of the stake while the share of RINL will depend on the basis of valuation of RINL’s contribution for the land in setting up the plant. Read more
Vedanta Resources had teamed up with Centricus to create $10bilion to invest in PSU.Read more
There are other major steel players in India who may be interested in participating in the bidding process, where Vedanta can be one who can file an EOI (Expression of interest). The state government is also showing interest in acquiring the steel plant, with opposition Telugu Desam Party (TDP), general secretary Nara Lokesh demanding the AP Chief Minister, Jaganmohan Reddy to move a resolution in the state Assembly so as to acquire the plant.
However, the future of the company still looks enigmatic and its owner can only be predicted in the near term. But Steel Union Minister, Dharmendra Pradhan’s statement indicates a new steel production unit is likely to come up in a joint venture with POSCO and Hyundai.
Will Vizag steel get privatised?
The fate of the plant rests largely on the degree of opposition by political parties and trade unions, support from local organisations and the amount of state government’s intervention.
References:
- The New Indian Express,11th February 2021 <https://www.newindianexpress.com/states/andhra-pradesh/2021/feb/11/posco-interested-to-set-up-plant-on-rinl-land-centre-2262470.html>
