CM Jagan writes to PM seeking revival of Vizag steel plant

In a letter to the PM, Jagan assured that the AP govt will closely work with the Centre in reviving the steel plant

VIJAYAWADA: Chief Minister Y.S. Jagan Mohan Reddy on Saturday night requested Prime Minister Narendra Modi to reconsider disinvestment plans of Rashtriya Ispat Nigam Limited (RINL), popularly referred to as Visakhapatnam Steel Plant (VSP). The CM suggested that the Prime Minister explore other opportunities to put the plant back on track.

In a letter to the PM, he assured that the Andhra Pradesh government will closely work with the Centre in reviving the steel plant. In particular, he sought three measures for the revival of VSP.

First, the Chief Minister suggested, was continuing operations to achieve turnaround, as with all sectors of the economy. This would make the steel sector also see a V-shaped recovery. In this regard, he pointed out that RINL achieved its highest ever capacity utilisation of 6.3 MTPA against the capacity of 7.3 MTPA in December 2020, posting a monthly profit of close to Rs 200 crore.

Second, Jagan Mohan Reddy sought captive iron ore mines to reduce input costs. He stated that RINL is purchasing iron ore from NMDC Bailadila mines at market price, which puts a cost disadvantage of around Rs 5,260 per MT of steel (at ore level). Allotment of captive mines will help RINL tide over its cost disadvantage.

Third, the CM sought financial restructuring under which short-term and long-term loans could be converted into equity, taking off repayment pressures and interest burden. The high cost debt, which is actually Rs 22,000 crore, is being serviced at interest rates as high as 14 per cent. Conversion of these loans into equity by banks can remove the interest burden. Further, listing RINL, Vizag, on the stock exchange would give banks the exit option through the stock exchange route, which would enable the general public to invest.

The Chief Minister pointed out that RINL, the corporate entity of Visakhapatnam Steel Plant, is a navratna company and the largest public sector industrial unit in the state, providing employment opportunities for close to around 20,000 people directly and to many others indirect employment opportunities in the city of Vishakhapatnam. VSP is also India's first shore-based integrated steel plant and a producer of long steel products catering to requirements of construction, infrastructure, manufacturing and automobile sectors.

He pointed out that the steel plant became a reality only after people of AP agitated for the Visakhapatnam Steel Plant. Thirty-two people lost their lives in the decade-long public agitation “Visakha Ukku – Andhrula Hakku” in the undivided Andhra Pradesh.

Jagan Mohan Reddy stated, "The plant performed well between 2002 and 2015, earning profits with positive net worth. The company has around 19,700 acres of land currently. The valuation of these lands itself would exceed '1 lakh crore due to location of the plant in a metropolitan area and rapidly expanding urban sprawl. However, owing to unfavourable steel cycle globally, the company started making losses since 2014–15 and found it difficult to service its debt. One of the major structural issues for its high cost of production is absence of captive mine, thereby affecting profitability," the CM pointed out.

( Source : Deccan Chronicle. )
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