Don’t privatise Rashtriya Ispat Nigam: Andhra CM Jagan Mohan Reddy to PM Modi

Urging the Centre to reconsider its decision to privatise Rashtriya Ispat Nigam (RINL), Andhra Pradesh Chief Minister Y S Jagan Mohan Reddy has suggested three measures including conversion of the company’s Rs 22,000 crore existing loan into equity for the revival of “state’s jewel”.

“I can emphatically say that the plant will again become a profitable venture given some support from the Government of India instead of taking the disinvestment route by 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 conversion,” Reddy wrote in a four-page letter to Prime Minister Narendra Modi.

Reddy said since the debt has been carrying 14% rate of interest, conversion of the Rs 22,000 crore debt into equity by the banks would help the company to remove its interest burden and improve its financial stability.

“Conversion of these loans into equity by the banks to remove the interest burden totally and listing the entity on the stock exchange giving the banks exit option through the stock exchange route through general public may also be explored,” the CM suggested.

RINL suffered a loss of Rs 1,369 crore in 2017-18 but was able to recover briefly with a net profit of Rs 97 crore in 2018-19. However, again in 2019-20, it suffered Rs 3,910 crore loss. The company recorded Rs 16,618 crore revenue in 2017-18; Rs 20,844 crore in 2018-19 and Rs 15,920 crore in 2019-20.

Reddy also pointed out that since RINL does not have any captive iron ore mine and hence, has to buy iron ore from the open market, it is at a disadvantageous position forking out Rs 5,260 extra for making every tonne of steel compared with many of its competitors.

“This excess cost of iron ore has cost implications of more than Rs 3,472 crore for RINL. It is essential to create a level playing field for all the players and hence allotment of captive mines for RINL will help tide over the cost disadvantage,” he said. Currently, RINL purchases iron ore from NMDC.

The Chief Minister also said that since the company has been earning a monthly profit of Rs 200 crore for some months now buoyed by higher capacity utilisation, the continuance of “this performance for a further period of two years will help the financial situation immensely”.

In the letter written on a passionate note, Reddy said the Vizag plant was realised only after many sacrifices by the people of the state.

“The people of my state rallied for the Visakhapatnam Steel Plant in which 32 people have 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 undivided AP.”

RINL is the largest public-sector industrial unit in the state creating employment opportunities for close to around 20,000 people directly and many other indirect employment opportunities. The company has 19,700 acres of land currently and the valuation of these lands alone could exceed Rs 1 lakh crore due to the location of the plant in the urban area and rapidly expanding urban sprawl.