Vizag Steel looks to Amaravati to bag big business, secure breather from losses

Company stands a chance of clinching steel business worth ₹1,500 crore if it can reach a deal with new Andhra Pradesh government; it would also mean an interim relief for the ailing plant

Updated - June 10, 2024 10:23 pm IST

Published - June 10, 2024 10:19 pm IST - Visakhapatnam

Steelmaking at the Visakhapatnam Steel Plant.

Steelmaking at the Visakhapatnam Steel Plant. | Photo Credit: File photo

Employees’ leaders from Rashtriya Ispat Nigam Limited-Visakhapatnam Steel Plant (RINL-VSP) are reportedly planning to meet Chief Minister-elect N. Chandrababu Naidu in hope of bagging the steel orders for his dream capital city Amaravati.

The company stands a chance of clinching steel business worth ₹1,500 crore if a deal with the State government is finalised. It would also mean an interim relief for the plant from its financial losses incurred since the previous BJP-led Union government announced the disinvestment of the plant.

According to sources, the leaders had met Chief Minister Y.S. Jagan Mohan Reddy during the YSRCP regime, but there was no positive response from him. They are now planning to meet Mr. Chandrababu Naidu, possibly after he is sworn-in as Chief Minister on June 12.

A deal almost signed
Responding to the RINL’s Expression of Interest, dated February 2023, for steel purchase, the YSRCP government appointed a committee in May 2023 to examine the possibilities of a deal. The panel visited the plant and discussed the matter with the management, during which the government was requested to have an MoU signed for purchasing steel worth ₹2,000 crore, needed for the construction of houses for the poor, irrigation projects such as the Polavaram and other government works. However, before a decision could be taken on it, the Jagan government was defeated in 2024.

The governments’ (both the State and Central) immediate attention is essential for the RINL-VSP as it is facing severe cash crunch owing to the loans taken for its forced expansion by 148% from three million tonnes to 7.3 million tonnes at a stretch during the 2007-18 period, that too, without raw material (iron ore) security. Further deterioration happened in April 2024 owing to a halt of coking coal supply from Adani Gangavaram Port, resulted in a revenue loss of ₹3,000 crore, according to Visakha Steel Executive Association (VSEA) general secretary K.V.D Prasad.

“Yes we are planning to raise the issue of procurement of the Vizag Steel for the infrastructure of Amaravati. We had met the then Chief Minister Y.S. Jagan Mohan Reddy and are now planning to meet N. Chandrababu Naidu after the oath-taking ceremony on June 12,” Mr. Prasad told The Hindu on June 10 (Monday).

In Financial Year 2021-22, the RINL-VSP produced 5.8 million tonnes of steel and registered ₹940 crore PBT (profit before tax). In January 2022, however, blast furnace-3 was closed down, resulting in a huge fall in hot metal production of around two million tonnes.

On the other hand, the RINL-VSP has to pay around ₹1,800 crore in interest a year to financial institutions. The company’s net worth fell drastically over the past three years since the privatisation proposal. The turnover also came down to ₹23,000 crore from ₹28,000 crore over the three-year period,” said president of the VSEA Katam S.S. Chandra Rao.

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