Eminent Personalities Write To PM Modi To Save RINL From Strategic Disinvestment

Former CMD of RINL and Retired IPS officer pen down a 13-page emotional note to stop disinvestment of RINL

Posted : 12 March, 2021
Author : Admin
Eminent Personalities Write To PM Modi To Save RINL From Strategic Disinvestment

Former Chairman and Managing Director of Rashtriya Ispat Nigam Limited, Y. Siva Sagar Rao and former Additional Director General of Police, V.V. Lakshmi Narayana have written a 13-page letter to Prime Minister Narendra Modi, urging him to save RINL from strategic disinvestment. The emotional letter also suggests a slew of measures which can be taken to restructure RINL so that the PSU can play the role of an important nation builder. The letter which also quotes famous Telugu poet Sri Gurajada Appa Rao - "Desamante Matti Kaadoyi Desamante Manushuloyi" (Nation means not the soil, but nation means its citizens), is given below for the benefit of the viewers of wwww.indianpsu.com -

We fully respect and appreciate your concern for saving the tax payers hard earned money by taking recourse to disinvestment/ privatisation of Public Sector Undertakings (PSUs) that are not yielding desired results in bringing the concept of Socialism which has been included as part of the preamble of the Indian Constitution . We, further appreciate your vision of monetising the assets of these PSUs for better use like the infrastructure development in the country which will realise the dream of a $ 5 Trillion Indian economy by 2025.'

However, we are of the sincere opinion that change needs to happen over a period commensurate with the socio economic conditions prevailing in the country rather than sale of all of PSUs except those in the 4 strategic sectors as per the envisaged policy of the Government. We also feel that it would be beneficial to carry it out in stages and on case to case basis.

It is submitted that Government of India, after independence, has adopted the concept of a mixed economy for the country. Through this concept Government wanted to provide employment to the under privileged, to bring in a just society.

In this back drop, we would like to present you the case of Visakhapatnam Steel Plant (VSP) I Rashtriyalspat Nigam Limited (RINL), A Navaratna Company, which the Government is proposing
for a strategic sale, 100% disinvestment i.e. Privatisation.

It is further submitted that, during the launching of Bharat made Covid Vaccine, people of Andhra Pradesh were overwhelmed with your reference to a quote of famous Telugu poet Sri Gurajada Appa Rao - "Desamante Matti Kaadoyi Desamante Manushuloyi" (Nation means not the soil, but nation means its citizens).

In the same echoing spirit, the VSP/RINL is whole heartedly referred by the people as "Visakha Steel plant ante Pedda Yantralukaadoyi, Teluguvaari Hrudaya Spandanoi" (Visakha Steel Plant is not huge machinery, but it is heart beat of Telugu people)

It submitted that the reason for this attachment and bonding among the Telugu speaking people with VSP/RINL is because the Plant was set up during 1966-69, with a big agitation " Visakha Vukku­ Andhrula ·Hakku" (Visakha Steel is the Right of People of Andhra Pradesh) spearheaded by students and 32 people sacrificed  their lives in police firing in several places of the combined Andhra Pradesh State. Around 16,500 farmers from 26 villages - and 64 hamlets came forward with large hearts and parted with their agricultural lands to the extent of 21,592 acres. In return, the Government of India assured them a house plot and permanent jobs to the eligible family members. Accordingly, Rehabilitation cards  (R-Cards) have been issued. As on date, about 8500 R-card holders are still waiting for the permanent jobs assured at the time of land acquisition by the Government. About 1,00,000 families are dependent of the steel plant for their livelihood which include about 18,000 permanent employees, 16,000 contract workers and outsourced employees.
Journey of Visakhapatnam Steel Plant :

Visakhapat nam Steel Plant (VSP) was started as a project under the Steel Authority of India Limited (SAIL) since 1971. However, it got bifurcated from the SAIL in 1981 and got designated as Rashtriya lspat Nigam Limited (RINL).

It was dedicated to the Nation on 1.8.1992 by the then Hon'ble Prime Minister Shri. P.V. Narasimha Rao with the production capacity of 3.4 Million Tonnes Per Annum (MTPA) of hot metal.
VSP faced lot of problems from 1991-2001 i.e. during the stabilization stage and got referred to the Bureau of Industrial Finance Restructuring (BIFR) in 1998. Later, with the blessings of the then Prime Minister Shri. Atal Bihari Vajpayee, the Government of India converted the interest component into equity and preferential shares qf Rs. 1333 Cr.. With this restructuring, VSP/RINL started making profits from 2001-02 onwards till 2014-15 and during the year 2004-05 it touched a record profit of Rs. 2,008 Cr. RINL paid back Rs 2,947 Cr to Government of India during 2011-12 to 2015-16, which was given as preferential shares during the financial restructuring.

The Production capacity of RINL was expanded from 3.4 MTPA to 6.3 MTPA in 2005 with a cost of Rs. 12,000 Cr. and from 6.3 MTPA to 7.3 MTPA at a cost of Rs. 4,000 Cr.. Funds for these expansions were generated by RINL from the profits a nd loans.

RINL established The Wheel Axle Plant at Raibereli, UP with an estimated cost of Rs.1 oo Cr., invested Rs. 361 Cr. in M/s Odisha Mineral Development  Corporation ( M/s OMDC) and Rs. 376 Cr. in M/s International Coal Venture Limited (M/s ICVL} for acquisition of coking coal in Mozambique, Africa.
Performance of RINL :

Profit and Loss of RINL: (Rs. in Crores)

Yea r    Profit/Loss    Yea r    Profit I Loss
2001-02    75    2011-12    751
2002-03    521    2012-13    353
2003-04    1547    2013-14    366
2004-05    2008    2014-15    62
2005-06    1252    2015-16    -421
2006-07    1363    2016-17    -1263
2007-08    1943    2017-18    -1369
2008-09    1336    2018;19    97
2009-10    797    2019-20    -3910
2010-11    658    2020-21(Up to 31-
12-2020)    -1839

Losses incurred by RINL can be mainly attributed to economic crises, anti-dumping policy, poor marketing conditions, less demand for steel in addition to the high cost iron ore purchases from NMDC at market price.
Taxes paid by RINL:

So far RINL paid taxes to the tune of Rs. 43,700 Cr. to the state and Central Government .
Central Government - Rs 35,100 Cr. State Government - Rs 8,600 Cr.

Financial and Performance details of VSP/RI NL:

Assets of RINL:

Gross  Block  of  Property,  Plant  &  Equipment,  intangible assets 32022.32
Investment  made by Government:
Equity share capital    4889.85
Outstanding debts    21236.01
 
Issues pertaining to RINL :
Allotment of Mines to RINL:

RINL started as a project under the umbrella of SAIL since 1971 and it continue up to 1981. Then it got bifurcated from SAIL without capital Iron and coal mines.
Coal mines:

RINL has been in principle allocated Rabodih OCP coal mine in Jharkhand .in March 2020 by the Ministry of Coal.
Iron ore mines:

RINL procures iron ore from open market at the market price in the absence of allocation of any captive mines. This is one of the main factors amongst other reasons for the loss incurred by RINL. RINL has requested various State Governments viz. Odisha, Chatthisgarh and Andhra Pradesh- for recommending the reservation of Iron ore deposits under section 17A (2A} of MMDR Act, 2015.
 
Land Bank of RINL:

Initially 21,592 acres of land was procured from 26 villages and 64 hamlets in the surrounding area, out of which, RINL is presently holding 19,703 acres after assigning 1,889 acres of land to Gangavaram Port, Railways and National Highways.

Out of the 19,703 acres presently in the possession of RINL, 10,370 acres, are covered by the plant, offices, town ship etc., 6,503 acres of land is under the green belt and remaining 2,830 acres is reserved for future expansion purpose.

The land is held in the name of The President of India and not in the name of RINL. The value of this entire land is shown in balance sheet as worth Rs.55.82 Corers only. Whereas, the present market value of this land can be put at Rs. 60,000 Cr. on a conservative side.

Contribution of RINL in Projects of National Pride:

The TMT Rebars of RINL have been used in the following prestigious projects :

1.    Sardar allbhbhai Patel statue 3200 Mts through L&T.

2.    Attal tunnel,Jammu, 8000 Mts through Apcons

3.    Pradhana Mantri avas yojana housing, 21000 Mts

4.    Po.lava ram Nation Irrigation project, 18000 Mts

5.    Nagpur-Mumbai national highway, 8500 Mts

6.    Delhi- Vadodara express highway, 3350 Mts
 
Alternatives Suggested for the Revival of VSP/RINL

It is submitted that VSP/RINL is one of the best performing Steel plants with its modernised machinery by operating with international standard parameters and highly experienced and dedicated man power. It has a glorious and illustrious track record as mentioned in the previous paragraphs. It also contributed to the exchequer of the Government to the tune of Rs. 43,700 Cr. in the form of taxes.

We are proud to mention here that RINL supplied 3,200 tonnes of high quality steel in the making of the prestigious project of india viz. "The Statue of Unity" of Hon'ble Sardar Vallabh bhai Patel, the Iron man and  proud son of Mother India.
After a thorough  analysis and after consulting several people associated with the Steel Industry in general and RINL in particular, we are here with submitting alternatives and feasible models for revival and stage wise disinvestment of VSP which will not only fulfil your vision of development by unlocking huge asset value from VSP/RINL but also keeping the morale and sentiments of Telugu people high.

Alternative - 1
Formation of Mega Steel Giant in Two Stages:

Ministry of Steel, Government of India has four ·PSUs related to Mining and Iron and Steel making, viz. NMDC and SAIL, RINL,KIOCL respectively each having different strengths as mentioned be·low.

NMDC (National Mineral Development Corporation ) has potential merchant mechanized mines of approximately 2000 million tones of iron ore reserves located in Bailadilla sector of Chattisgarh state and Bellary, Hospet sector of Karnataka State, supplying salable product to RINL, various domestic and overseas buyers. An integrated steel plant having a capacity of 3.0 million tones in Nagaranar, Chattisgrah·state is going to be commissioned in a period of 1 year by NMDC.

SAIL (Steel Authority of India Limited) has Integrated steel plants having capacity of 24MTPA production and on expansion can reach upto 50  MTPA  with  wide  marketing  network  and  adequate infrastr ucture facilities. It has got potential captive iron, coal and dolomite mines located in Jharkhand, Odisha and Chhattisgarh states.
RINL (Rashtriya Jspat  Nigam  Limited)  has shore  based  Integrated Steel Plant in visakhapatnam having capacity of 7.3 MTPA hot metal and a capacity for expansion up to 16 MTPA by 2030. It has got a dedicated  work  force  with  wide   marketing  network  across  the country.· RINL has Potential captive sources of Limestone, Dolomite, Manganese and Quartz mines located in Andhra Pradesh and Telangana · States. It has Stake in M/s OMDC and M/s ICVL and also has commissioned wheel axel plant at Raibareli, Uttar Pradesh State.
KIOCL (Kudremukh Iron Ore Company Limited) has potential iron ore mines in Karnataka, with expertise in pellet making through slurry pipe line and has nearby port facility.
As per the National Steel Policy, 2017, the target steel production envisaged is to the tune of 300 Million Tonnes Per Annum ·(MTPA) by the year 2030 from the present level of 112 MTPA (Approx}. Keeping this target in view, the following strategy is put up for kind consideration for better and optimum utilisation of these four units viz. NMDC, RINL, SAIL,and KIOCL.

Stage 1: Initial merger of RINL with NMDC and l ater with SAIL for forming MEGA Steel giant

(i} Merger of RINL with the NMDC, will be the first step towards establishing a "Steel Giant" and this will resolve the issue of "no captive mines" of VSP/RINL once for all.

(ii} While merging RINL with NMDC, Government may transfer the land- of about 16,872 acres, which is in the name of the President of India covering the existing operating plant, town-ship, two reservoirs, green belt to RINL and the remaining land of about 2830 acres may be explored  by Govt. of India for further industrial development which could fetch to the tune of Rs. 9,000 Cr contributing to the target of disinvestment.

( iii} After doing this, it is proposed that the proposed Steel giant (NMDC-RINL} may be merged with SAIL, thereby it will become a "Mega Steel Giant"

1 which shall make the steel production capacity of the PSUs to about 30MTPA. It further, strengthens the position of RINL in respect of availability of 'Iron ore as we.

II as the availability at cost price as SAIL has captive Mines.

(iv} The Mega Steel giant also with the available expertise of man power can successfully run the Nagarnar Steel plant of the NMDC in Chattisgarh which is being proposed for privatisation.

Stage 2: Merger of KIOCL and other Steel Plants with the Mega Steel Giant

(i) Another unit under the Ministry of Steel, KIOCL (Kudremukh Iron Ore Company Limited) may also be considered for merger with the Mega Steel Giant (SAIL­ NMDC-RINL).
The, KIOCL has captive mines and produces pellets which are required for various Steel plants and also caters for Mega Steel Giant requirements for the economic operations of the  Plants and  additionally  generates foreign exchange through exports.

(ii) The  merger  of  other  Steel  Plants  like  Nilanchal   lspat Nigam Limied (NINL), Odisha also can  be  considered. NINL has captive mines and merging it in the proposed mega Steel giant will help RINL and also  for  the  Indian steel Industry to achieve the targets of steel  production.

(iii) Keeping Government shareholding in the proposed Mega Steel Giant for over few years  is essential till Bharat reaches its National Steel Policy (NSP), 2017 target of making 300MTPA,  also, it will help the  infrastructure push given by the Government of India in the Budget, 2021-22. Subsequently, the Government may, if required, consider disinvestment in phased manner from this highly·valued Mega Steel Giant.

Advantages of establishing the Mega Steel Giant

i) The Mega Ste I Giant is likely to result in the reduction of Raw material cost and the cost of production of Steel due to resource sharing.

ii) It is likely to result in savings to the tune of Rs. 18,000 Cr. per annum at the present Scale of Production. It is also likely to result in sharing of Technical Expertise

iii) It will pave the way for expansion of the production upto 75 MTPA.

iv) It is also likely to attract FOi.

This raising of a "Mega Steel Giant" is in fact is in line with the recent Government initiative of merging/consolidation of PSU Banks into large PSU Banks, Purchase of HPCL and Gujarat Petroleum by ONGC, Mumaligarh Refinery by IOC ( Indian Oil Company) and Ell ( Engineers India Limited) , BHPV (Bharath Heavy Plates and Vessels) by BHEL and REC (Rural Electrification Corporation) by the Power Finance Corporation (PFC)

The proposed Mega Steel Giant,in public sector is also essential to make the ambition of the Government of India of reaching $5 Trillion economy and 300MTPA Steel capacity.

Alternative - 2

Self-Sustenance of VSP/RINL:

Following measures are needed to be considered for implementation for the immediate survival and sustenance of RINL.

(A) Re-Engineering of Balance Sheet:

a) Government of India may transfer land of about 16,872 acres, which is in the name of the President of India covering the existing operating plant, town-ship, two  reservoirs, green  belt to RINL.

b) With this, the balance sheet of RINL will become robust and leads for better credit rating and facilitate to raise more loans from the market at competitive interest rates for further expansion/ operationa I requirement.

c) The remaining land of about 2,830 acres may be explored by Govt. of India for further industrial development which could fetch to the tune of Rs. 9000 Cr., contributing to the target of disinvestment.

(B) Making Immediate Working Capital available:
For immediate survival of the plant, VSP/RINL needs around Rs.5,000 Cr as a life line and this amount may be allowed to be mobilized through the following means:

a) Monetisation of land located at HB Colony in Visakhapatnam City, which could fetch around Rs 1,000 Cr.

b) Sale of forged wheel plant at Raebareli, Uttar Pradesh , which could fetch around Rs. 2,500 Cr.    .

c) RINL may be allowed to sell the stake in M/s OMDC along with M/s International Cole ventures Limited, which could fetch around Rs. 1,500 Cr.

d) While incorporation of RINL, as per the Detailed Project Report (DPR), the Iron ore D-block located in Bachelli mine, Chhattisgarh, was exclusively earmarked for RINL to take care of Iron Ore requirements but mining is to be done by NMDC and supply of Iron ore on cost plus basis. However, Iron Ore is being supplied to RINL/VSP by NMDC at market rate till date. The envisaged arrangement as per DPR (cost plus basis) shall be put into force immediately to mitigate higher raw material cost.

All the above initiatives will ease out the shortage of working capital requirements and also reduce the debt burden. Further, it strengthens the Balance sheet which in turn facilitates to tap the required loans at competitive rate of interest. Further, it facilitates to achieve the rated capacity of 7.3 MTPA for presenting the better financial  performance.
Apart from the above, it also helps in fulfilling the commitment made by the Gal for providing employment to the balance 8500 displaced persons (R-Card Holders). Further, Government of India is likely to get about Rs. 9,000 Cr through monetisation of land, which contributes towards the disinvestment target.
It is further requested. that the recent policy of Government that "Government has no business to be in business" needs a re-visit and has to be seen in a holistic perspective in respect of VSP/RINL and the proposed Mega Steel Gaint.

In view of the above, we, here by humbly request you to personally examine our proposal of establishing an envious Mega Steel Giant by the suggested two stages of merger of NMDC-RINL-SAIL-KIOCL and other Steel Companies suggested as Alternative 1and for immediate self-sustenan ce of RINL/VSP suggested as Alternative 2.
The People of Andhra Pradesh are anxiously hoping that their heart beat i.e. Visakapatnam Steel Plant I RINL will receive positive response from the Hon'ble Prime Minister and make it contribute to the $ 5 trillion economy and make Bharat "Atmanirbhar".