NDA allies in Andhra face Vizag steel plant revival challenge

Hyderabad: The issue of disinvestment of Visakhapatnam Steel Plant (VSP) in Andhra Pradesh appears to be an immediate big challenge for coalition partners TDP and Jana Sena, as the Centre is yet to finalise a revival plan to bail out the debt-ridden and cash-strapped PSU and also building pressure on TDP in the state.

In the elections, the Vizag steel plant issue had become an important poll plank in the Vizag region. The TDP-led NDA alliance assured that if voted to power, the Vizag steel plant will be revived and protected from going under the hammer.

However, it's been four months that the elections are over, and the Centre is yet to announce a revival plan even as RINL, the corporate entity of VSP, has started defaulting on the payments to its suppliers and other lenders. During his recent visit to Delhi, VSP has figured prominently in Chief Minister N Chandrababu Naidu's discussions with heavy industries minister, HD Kumaraswamy.

State deputy chief minister and chief of BJP's key ally Jana Sena in Andhra Pradesh, Pawan Kalyan, had recently held a meeting with the plant workers and assured the PSU will be protected from going for privatisation.

“Secretary Steel appraised about the challenges faced by RINL in terms of availability of raw material, loan repayment, and, further, there is a need to invest in Capex for effective capacity utilisation. The heavy industries minister mentioned the efforts being done by the Government of India to sustain RINL through fund infusion,” said Naidu after meeting Kumaraswamy in Delhi on Tuesday.

Naidu requested that the government of India has to identify ways to support RINL and ensure its sustainability of operations and effective capacity utilisation. The heavy industries minister assured Naidu of his commitment to consider the revival of RINL and to support the industrial landscape in Andhra Pradesh.

While there has been no official word on the revival package, sources in the steel ministry indicated DH that GoI is considering short-term measures like Rs 1,140 crore as a loan and Rs 500 crore as an emergency grant.

Due to a shortage of raw materials and cash flow issues, only one of VSP's three blast furnaces has been operational in September. The plant is currently operating at 1.25 to 1.3 million tonnes of its total capacity of 7.3 million tonnes.

RINL's overall debt is estimated to be around Rs 35,000 crore, and SBI is the highest lender, with an exposure of around Rs 10,500 crore. It is learnt that while the loan will be used to make payments to the lenders so that the PSU will not slip into the NPA category, the grant will be used to make GST payments.

It was on January 27, 2021, that the Cabinet Committee of Economic Affairs (CCEA) gave in-principle approval for 100 percent strategic disinvestment of the Central government’s shareholding in RINL along with management control by way of privatisation.

Since then, thousands of VSP employees have been protesting, demanding that the Centre roll back its decision.

The state government at that time also passed a unanimous resolution against the disinvestment in the Assembly and sent it to the Centre.

VSP is the only shore-based integrated steel plant in the country, with two major ports within 25 km of it.

The plant expanded its capacity from 3 million metric tonnes to 7.3 million metric tonnes as per the National Steel Policy and is the single-largest public sector unit (PSU) in the steel industry.