VIJAYAWADA: Chief Minister Y.S. Jagan Mohan Reddy reiterated his appeal to Dharmendra Pradhan, Union minister for petroleum, natural gas and steel, to stop privatisation of the Visakhapatnam Steel Plant (VSP) and requested him to consider the alternatives suggested by the state in reviving the plant.
The CM met Pradhan on the second day of his two-day Delhi visit on Friday and held discussions for over an hour regarding Kakinada Petro Complex and the VSP.
Discussing the Kakinada Petro Complex, the Chief Minister stated that it was promised and listed in AP Reorganisation Act that a petro complex would be set up in Kakinada SEZ. He said detailed project reports (DPRs) had been prepared for the project by HPCL-GAIL companies together with a capacity of 1 million metric tonnes and at a cost of Rs 32,900 crore.
As the Centre had asked for Rs 975 crore per annum under Viability Gap Funding (VGF) for 15 years, the Chief Minister requested to cut down the VGF since the state could not bear such a burden in the present circumstances.
Asserting that the Central government had reduced the corporate tax by 25 per cent and overall rate of interest across the world had also been reduced, the Chief Minister said the project could be made possible without any VGF. He said the members had already been nominated for the working group on behalf of the state government to discuss the project modalities and asked the Centre to issue immediate directions to start the project.
Responding to the Chief Minister, Pradhan said that a petro complex would definitely be set up in Andhra Pradesh and he was also positive about the VGF. He told the Chief Minister that a meeting would be scheduled next week with the Chief Secretary and the officials of the petroleum department to finalise the procedures.
The Chief Minister said 32 people had laid down their lives to set up the steel plant in Visakhapatnam, where nearly 20,000 people were employed and thousands more were having indirect employment.
Further, the Chief Minister explained that the VSP performed well and made profits between 2002-2015. The plant had gone through an expansion by taking loans, but due to the slump in international market during 2014-15, the organisation fell into debts with the increasing operational costs and lack of own mines. He explained that in fact, the VSP had achieved the highest ever capacity utilisation of 6.3 MTPA against the installed capacity of 7.3 MTPA and started making a monthly profit of close to Rs 200 crore.
Continuing this performance for a further period of two years would result in improving the financial situation, he said adding that the Plant had 19,700 acres of land which was worth hundreds of crores and could be monetised to clear the crisis.
Jagan Mohan Reddy said, “Currently, RINL is purchasing iron ore from NMDC Bailadila mines at a market price of around Rs 5,260 per MT of steel. Many of its competitors have captive mines for over 60 per cent of their requirement 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 crore for the plant and it is essential to have an allotment of captive mines in order to overcome the cost disadvantage.”
The Chief Minister requested the Centre to allot the captive mine in Odisha which would help in reviving the VSP.
Besides these, Jagan Mohan Reddy suggested other possibilities in restructuring the finances of the VSP, where all the short-term and long-term loans could be converted into equity, easing the burden. He said, “The plant has a debt of Rs 22,000 crore which is being serviced at interest rates as high as 14 percent. Conversion of these loans into equity and listing the entity on the stock exchange would remove the interest burden totally, where the banks would also encash through the stock exchange. VSP has supplied over 7,000 MT of oxygen during the second wave of Covid-19, saving lives of people in hard times and the state is ready to work with the relevant Central departments to protect this company.”