Employees of the Rashtriya Ispat Nigam Limited (RINL), which has a steel plant in Visakhapatnam, Andhra Pradesh, have been taking out processions demanding that the centre roll back its decision to privatise the PSU. Major political parties of the state have lent their support to the employees. Now, they have drawn support from state chief minister Y.S. Jagan Mohan Reddy, who has written to Prime Minister Narendra Modi to reconsider the decision.
The letter follows the opposition Telugu Desam Party’s move to raise the ante on the issue. It has been opposing the privatisation in the state assembly too. TDP leader G. Srinivasa Rao has resigned as an MLA from the Andhra Pradesh assembly in protest against the Centre’s decision. Srinivasa Rao, who represents the north assembly constituency in Visakhapatnam, has sent his resignation to the Speaker of the state assembly. All these moves have the blessings of former CM and TDP leader N. Chandrababu Naidu
“Naidu is playing a cat-and-mouse game with Reddy; he has now forced the latter to write to the PM opposing the privatisation. Will Modi listen to him?” asks an observer of the state’s political scene. In the past, Jagan Mohan Reddy’s party has gone out of its way to lend critical support to the government in the Rajya Sabha on the passage of many a legislation. “If Reddy is rebuffed, he may lose face politically in AP,” the observer adds.
Many observers see RINL’s privatisation and the growing political opposition to it as a test case of the Modi government’s resolve. The budget for 2021-22 has set a disinvestment target of Rs1.75 lakh crore for next fiscal. The RINL strategic sale proceeds would be part of the disinvestment target.
Strategic disinvestment
Visakhapatnam Steel Plant (VSP) has a capacity of 7.3 million tonnes per annum and took up plant modernisation and capacity expansion, borrowing loans from banks. Post-budget, the Cabinet Committee on Economic Affairs (CCEA) gave in-principle approval for 100 per cent strategic disinvestment of the Centre’s shareholding in RINL, along with management control by way of privatisation.
In his letter to Modi, Reddy has said that the state government is ready to work with the Steel Ministry to protect the Public Sector Enterprise, which provides employment to 20,000 people directly and many others indirectly. He assured that, “The government of Andhra Pradesh is ready to work with the Ministry of Steel to protect the jewel of Andhra Pradesh. Therefore, I request you to reconsider the disinvestment plans of RINL Visakhapatnam and explore other opportunities to put the plant back on track.”
The CM acknowledges that the CCEA’s clearance for the privatisation has become a point of discussion among the people of the state and a cause of concern. Owing to the ‘unfavourable’ steel cycle globally, the company has been making losses since 2014-15 and was finding it difficult to service the debt. “One of the major structural issues, which has also led to high cost of production, is the absence of a captive iron ore mine, thereby affecting the profitability,” he said.
Reddy suggested that the PSU’s short-term loans, along with long-term loans, be converted into equity, taking off repayment pressures and interest burden. He also requested that RINL be allotted captive iron ore mine in order to reduce the input cost.
RINL also runs two subsidiaries – The Orissa Minerals Development Co Ltd (OMDC) and The Bisra Stone Lime Co Ltd (BSLC). The company has been incurring heavy losses since 2016-17 on the back of rising interest costs, except for 2018-19, when it posted a net profit of Rs96.71 crore.
In September 2020, the RINL board had approved a revised VRS for employees to cut costs and improve productivity. The revised VRS is applicable to employees, who have completed 15 years of service and have attained 45 years.
OMDC operates six iron ore and manganese ore mining leases at Barbil in Odisha’s Keonjhar district. The leases are Dalki manganese mines, Kolha Roida iron and manganese mines, Thakurani iron and manganese mines, Belkundi iron and manganese mines, Bariaburu iron mines and Bhadrasai iron and manganese mines. The lease rights of all the six mines have expired and are not in operation for want of statutory clearances.
BSLC undertakes mining and marketing of limestone and dolomite. The mines are located at Birmitrapur in Orissa’s Sundargarh district, with reserves of about 287 million tonnes of dolomite and 367 million tonnes of limestone.