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Amid financial crunch, Vizag steel plant to lease out 1,400 acres of land to NMDC to gather funds
The NMDC has put forth the proposal to take 1,400 acres of land, located between the steel plant and Gangavaram port, on lease to set up its pellets plant and stock yard
The Central public sector giant Rashtriya Ispat Nigam Limited (RINL), popularly known as Visakhapatnam Steel Plant (VSP), which has been facing a severe financial crunch, is contemplating to lease out about 1,400 acres of land to another public sector giant National Mineral Development Corporation (NMDC) to mobilise working capital to run the plant, officials familiar with the matter said.
The steel plant has a land bank of 19,730 acres at Gajuwaka in Visakhapatnam, of which the steel plant is set up in 11,000 acres. Around 500 acres of land has been used for establishing a township for the steel plant employees and 500 acres is used by reservoirs to store water for the plant.
“The rest of the land is kept for future expansion of the plant from its present capacity of 7.3 million tonnes, besides maintenance of greenery and open space required, as per the environmental norms,” Visakhapatnam Steel Plant Workers’ Union general secretary D Adinarayana said.
Out of the available land, the NMDC has put forth the proposal to take 1,400 acres of land, located between the steel plant and Gangavaram port, on lease to set up its pellets plant and stock yard. “The issue came up for discussion during the visit of Union steel secretary Nagendra Nath Sinha to the steel plant on August 21. The discussions are in advanced stage,” Adinarayana said.
While the representative of the RINL management could not be reached for further details, a senior employee the steel plant familiar with the development said the NMDC has offered ₹1,500 crore upfront for the land, besides paying a lease amount of ₹70 crore per annum for the lease period of 33 years.
“This will help the RINL to partly meet its working capital requirements immediately. Secondly, the pellets produced by the NMDC would also be used as raw material for the steel plant. At present, we are importing this iron ore raw material from Kirandul and Bacheli in Chhattisgarh and if the plant is established within the backyard of the RINL, it would bring down the transportation cost,” the official said.
While the trade union leaders have, by and large, not opposed to leasing out the land to the NMDC, some of them have expressed apprehensions that it could be part of the bigger plans of the Centre to privatise the Visakhapatnam Steel Plant, which 17,000-odd workers of the steel plant have been resisting for nearly three years.
It was on January 27, 2021 that Cabinet Committee on Economic Affairs (CCEA) gave an in-principle approval for 100% strategic disinvestment of Government of India shareholding in the RINL along with management control by way of privatisation.
Department of Investment and Public Asset Management (DIPAM) secretary Tuhin Kanta Pandey declared then that the privatisation of RINL was part of the Central government’s efforts to raise ₹1.75 lakh crore through strategic disinvestment of loss-making public sector undertakings (PSU).
Though efforts have been going on since then, there has not been much progress in the privatisation exercise, even as the trade unions and political parties have been staging demonstrations and agitations periodically.
The trade union leaders expressed their apprehensions over the leasing out of land to the NMDC during the recent visit of the Union steel secretary. “He [Union steel secretary Nagendra Nath Sinha] reiterated that the privatisation was a policy decision of the Centre. In the meanwhile, the RINL has to find ways to mobilise the working capital,” another trade union leader Jyesta Ayodhya Ramu said.
At present, the RINL has been running far below its production capacity of 7.3 million tonnes per annum (mtp). “Out of three blast furnaces, only two are under operation, while the third one has been inactive for more than one-and-a-half years. Even the two furnaces are not operating to their capacity – producing only 3.4 mtp. While the plant could produce 25,000 tonnes of hot metal every day, not even 14,000 tonnes are being produced now,” Adinarayana said.
He said the RINL has an outstanding loan of around ₹24,000 crore. “If the Central government announces a moratorium on payment of interests for two years, we have the capacity to earn profits to such an extent that we can wipe out all the outstanding loans in these two years,” the trade union leader said.
According to the official figures of the Union ministry of steel, the RINL reported a net loss of around ₹3,049 crore in 2022-23 and it plans to bring down the losses to ₹155 crore in 2023-24.
During 2021-22, the RINL achieved a net profit of ₹913 crore and in the previous year, it showed a loss of over ₹1,000 crore. The RINL achieved a turnover of around ₹24,050 crore during 2022-23, which is a drop by 15%, from ₹28,215 crore the previous fiscal year. The targeted turnover for 2023-2024 is ₹31,264 crore, the official figures said.
