RINL set to incur net loss after a gap of 13 years

A view of Visakhapatnam Steel Plant at Ukkunagaram.—File Photo: K.R. Deepak

Rashtriya Ispat Nigam Limited, the corporate entity of Visakhapatnam Steel Plant, is poised to register a net loss during the current fiscal after a gap of 13 years.

Reliable sources told The Hindu that the company was expected to finish the financial year with a net loss of around Rs.1,500 crore.

The company completed the 6.3 million tonne expansion two years ago with an investment of Rs.12,500 crore raising it through internal accruals.

The Navratna company, which had set a target for a turnover of Rs.18,000 crore by producing 4.3 million tonne against its rated capacity of 6.3 million tonne after stabilising the new units during 2015-16, is hit hard due to sluggish economy, flooding of market with cheap products from China and CIS, and high production cost.

Unlike other major Indian steelmakers, RINL, a Visakhapatnam-headquartered wholly-owned government enterprise, does not have captive mines, forcing it to spend heavy amounts towards raw material. The company clocked a turnover of Rs.11,718 crore with a net profit of Rs.62 crore during last fiscal.

RINL, also popular with its long products under brand name Vizag Steel, achieved a turnaround in 2002-03 with a net profit of Rs.450 crore and a best-ever turnover of Rs.5,059 crore in 2002-03. The company’s disinvestment by offloading 10 per cent of government’s equity pending for a long time could not be taken up so far due to volatile market.

The RINL management is hopeful that they would perform better during the next fiscal due to imposition of Minimum Import Price and the emphasis laid in the Union Budget to give a big push to infrastructure sector and rural economy.

When contacted, former Chairman-cum-Managing Director of RINL Y. Siva Sagar Rao told The Hindu that the company could have reduced the production cost substantially by achieving rated capacity to put up a good show.

“The company used to produce at 120 per cent of rated capacity of three million tonne in the past. Now it is taking a long time to stabilise the new units due to some reason or the other,” he stated.

Mr. Rao felt that instead of waiting for the market to improve, RINL should focus on cost reduction by improving efficiency parameters. “We should learn how China is able to survive by selling its products,” he said.