AP CM Jagan Reddy write to PM Modi, urges to reconsider disinvestment of Vizag steel plant

Andhra Pradesh Chief Minister YS Jagan Mohan Reddy has written a letter to Prime Minister Narendra Modi requesting the Government of India to reconsider its plan of disinvestment of the Visakhapatnam Steel Plant. The Cabinet Committee on Economic Affairs (CCEA) has given approval for 100% strategic disinvestment of Rashtriya Ispat Nigam Limited (RINL) including the giving up of management control by way of privatisation. RINL is Corporate entity of Visakhapatnam Steel Plant Ltd.

While urging the prime minister to reconsider the disinvestment plan, the Andhra CM also suggested immediate measures to adopt in order to strengthen the viability of the plant.

"Sir, 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," Jagan Reddy said in the letter to PM as he laid down suggestive measures for the Union Government.

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Measures suggested by Jagan Reddy:

Continuing Operations to achieve turn around

While stating that the steel sector is also witnessing a V-shaped recovery like all other sectors, the Andhra CM highlighted that RINL has achieved highest ever capacity utilisation of 6.3 MTPA against the capacity of 7.3 MTPA from December 2020 and started making a monthly profit of close to Rs 200 crore. The CM added that continuing this performance for a further period of two years will help the financial situation immensely.

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Allotment of a Captive Iron Ore to the plant

Contending absence of captive iron ore mine for Visakhapatnam Steel Plant as one of the significant reasons of losses, the CM called for allotment of captive iron ore mines for the steel plant while saying that the move will help tide over the cost disadvantage which Visakhapatnam Steel Plant faces as against competitors. Jagan Reddy pointed out that many of the competitors have captive mines for more than 60% of their requirement.

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 Financial restructuring

The CM suggested converting the short term and long term loans into equity to reduce the pressure of repayment of the loans and the interest burden. He pointed out that the company was bearing the interest rate as high as 14% on a high-cost debt to the tune of Rs 22,000 crore. He opined that the option of converting the loans to equity and listing in stock markets could be explored.

"The Steel Plant stands as a testimony to the will of Telugu people and it is continued as an icon of Telugu achievement in our collective psyche till date. The GoAP is willing to work with the Ministry of Steel to protect this jewel of Andhra Pradesh," the letter read.

Visakhapatnam Steel Plant is the largest public-sector industrial unit in the state creating employment opportunities for close to 20,000 people directly and other indirect employment opportunities in the city of Visakhapatnam. It is India's first shore-based integrated steel plant, the Andhra CM said as he expressed his assurance to work in tandem with the Union Government to "revive the plant for unlocking greater value to the society and in particular to the people of Andhra Pradesh."

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