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In a significant move that is likely to trigger public outcry in Andhra Pradesh, the Narendra Modi government at the Centre has finalized the privatisation of Rashtriya Ispat Nigam Ltd (RINL), the public sector corporate entity of Vizag Steel Plant (VSP).
The Union Cabinet has approved the privatisation of RINL earlier this week, which was announced by the Ministry of Steel on Tuesday.
A Navratna PSU since 2010, RINL's Vizag Steel Plant based in Visakhapatnam, is India's first shore-based integrated steel plant built with state-of-the-art technology. Commissioned in 1992 with a capacity of 3.0 MTPA of liquid steel, VSP subsequently enhanced its capacity to 6.3 MTPA in April 2015 and to 7.3 MTPA in December 2017.
RINL is a wholly-owned central PSU, however, the Centre decided in September 2011 to divest 10 per cent of its stake via an initial public offering (IPO). Somehow, the plan had been kept on hold for various reasons until the decision to privatize it completely now.
VSP, with an exclusive product mix of longs, is the largest producer of bars and rods in the country with a market share of over 10 per cent and has recorded an annual turnover of ₹20,844 crores in 2018–19. The products of RINL include rebars, wire rods, rounds, structurals, blooms and billets, and pig iron and the company also markets the resultant by-products like coal chemicals - ammonium sulphate, benzol products, etc.
RINL has three captive mines and 25 marketing branches across India and it is also in the process of setting up another unit -- Forged Wheel Plant - at Raebareli, Uttar Pradesh.
"While approving the strategic disinvestment of RINL a few days ago, the Cabinet delegated powers to the Alternative Mechanism headed by the Finance Minister to decide whether the subsidiaries of RINL will be part of the transaction, depending on the feedback from potential investors," a government official said while briefing on the Cabinet decision.
VSP has one subsidiary - Eastern Investment Limited (EIL) - with 51 per cent shareholding, which in turn has two subsidiaries -- Orissa Mineral Development Company Ltd (OMDC) and Bisra Stone Lime Company Ltd (BSLC). The company has a partnership in RINMOIL Ferro Alloys Private Limited and International Coal Ventures Limited in the form of joint ventures with 50 percent and 26.49 percent shareholding respectively.
Notably, despite its commercial activity on par with any of its private competition, VSP had incurred heavy losses in 2017 and 2018 but recovered with a net profit of ₹96.71 crores in 2019. The PUS made consistent profits between 2002 and 2015.
According to the report submitted by the Union Ministry of Steel, Vizag Steel Plant is the only steel-manufacturing PSE in the country that has no captive iron ore mine. The losses were majorly due to the lack of captive mines due to which the RINL is procuring the iron ore supplies at market price, resulting in a loss of at least ₹5,000 on every ton produced.
Protests emerge against privatization of Vizag Steel
Following the Centre's announcement to privatize VSP, hundreds of employees and workers held a protest demonstration at the plant in Visakhapatnam on Wednesday.
"About one lakh people are dependent on the steel plant, including 17,000 permanent employees and workers and 16,000 contract workers. VSP was established in 1988 after a prolonged 'Visakha Ukku – Andhrula Hakku' movement in which 32 people laid down their lives and 70 legislators, including MPs and MLAs, resigned from their posts demanding for the PSU to be set up in Visakhapatnam. It is now the biggest PSU in the state and the people will not allow privatization of our source of livelihood,” said Jyeshta Ayodhya Ramu, president of the plant’s recognised workers’ union.
The union has called for a dharna on February 5, urging all its workers, employees and political parties to assemble at the Greater Visakhapatnam Municipal Corporation office in the city.
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