With the Narendra Modi government determined to hurtle through with its intentions to disinvest in most of the 439 Central public sector undertakings (PSUs), there appears, notwithstanding the apprehensions and protests in Andhra Pradesh, to be very little chance of the Navratna company, Rashtriya Ispat Nigam Limited-Visakhapatnam Steel Plant (RINL-VSP), escaping the disinvestment/privatisation bullet. News of the announcement that the Cabinet Committee on Economic Affairs (CCEA) had given in-principle approval for a 100 per cent strategic disinvestment of the Government of India’s shareholding in RINL-VSP, along with management control, has spurred protests, both in the port city and the rest of Andhra Pradesh.
RINL-VSP, or Visakhapatnam Steel Plant (VSP) as it is popularly known, has since 2014-15 been recording losses and has been finding it difficult to service its debt. The losses have been attributed to the present unfavourable global steel cycle, and a high cost of production at the plant thanks to the absence of a captive mine. VSP, which happens to be the largest public sector industrial unit in Andhra Pradesh, has close to 18,000 employees on its rolls, while another 80,000 people mostly in the city of Visakhapatnam are indirectly gainfully employed thanks to the steel plant.
The proposed move to privatise the steel plant has been opposed by both local people, who have taken out huge rallies, and the State’s political hierarchy, who, cutting across party lines, have forcefully maintained that the State had an inseparable connection with the steel plant. Andhra Pradesh Chief Minister Y.S. Jagan Mohan Reddy has dashed off a letter to Prime Minister Modi opposing the move, while a former Union Minister and Bharatiya Janata Party (BJP) national general secretary Daggubati Purandeswari has publicly stated that the BJP was not in favour of the VSP being handed away to the private sector. Purandeswari told reporters that she would convey the public’s opposition to the privatisation of VSP to the party high command.
A former Minister and Telugu Desam Party legislator Ganta Srinivasa Rao has even resigned in protest against the privatisation of the steel plant. His resignation will come into effect the moment the Union government’s decision to privatise the steel plant is implemented.
The Forum for Development of North Andhra (FDNA) has also given a call to protect the RINL-Visakhapatnam Steel Plant from privatisation. Stating that the steel plant was a jewel in the crown of the Telugu States—Andhra Pradesh and Telangana—A. Aja Sarma, the general secretary of the forum, said the steel plant had been achieved after many a great struggle in which 32 people sacrificed their lives and people’s representatives quit their posts. Said Sarma: “The decision of the Modi government putting up the steel plant for sale is nothing but a cheating of the Telugu people. The government had acquired over 20,000 acres of land from the farmers in the name of public interest. The plant is supported by strong technical personnel and it remains the only shore-based steel plant in the country with assets worth about Rs.2.5 lakh crore. The government has no right to sell it.”
‘Icon of Telugu achievement’
In his letter to Prime Minister Modi, Jagan Mohan Reddy explained that the steel plant stood as a testimony to the will of the Telugu people and that it was an icon of Telugu achievement. He said that it was in April 1970 that the then Prime Minister of India announced the government’s decision to establish a steel plant at Visakhapatnam, ending the decade-long “Visakha Ukku-Andhrula Hakku” public agitation in undivided Andhra Pradesh. Requesting Modi to explore other opportunities to put the plant back on track, the Chief Minister said that the Andhra Pradesh government would closely work with the Government of India in reviving the plant “in order to unlock greater value to society in general, and in particular to the people of Andhra Pradesh”.
Exuding confidence that the plant would again become a profitable venture, Jagan Mohan Reddy suggested that the Centre, instead of taking the disinvestment route, could think of financial restructuring, including conversion of short-term and long-term loans into equity, swapping high cost debt with low cost debt, in order to ease repayment pressures and interest burden. And mostly crucially, in a bid to reduce input costs it could allot VSP with a captive iron ore mine.
The Chief Minister noted that the high cost of VSP’s debt of Rs.22,000 crore was being serviced at interest rates as high as 14 per cent, and conversion of these loans into equity by the banks would remove the interest burden totally. The Chief Minister’s letter also suggested that RINL-VSP be listed on the stock exchange, giving banks an exit option through the stock exchange route disinvesting stake to the retail investor.
Located 26 km south of Visakhapatnam city, VSP, with a 7.3 million tonne per annum capacity, is India’s first shore-based public sector integrated steel plant, and a producer of long steel products catering to the requirements of the construction, infrastructure, manufacturing and automobile sectors. Though presently going through a bad patch, VSP had declared a good performance between 2002 and 2015 earning profits with a positive net worth. The plant also experienced a turnaround in 2002 after being reported to the Board for Industrial and Financial Restructuring as a sick company. The company has around 19,700 acres of land at present, with estimates indicating that the value of these lands could exceed Rs.1 lakh crore due to the location of the plant in a rapidly expanding urban sprawl.
The Central government’s latest disinvestment policy as announced by Finance Minister Nirmala Sitharaman in her Budget envisages the government exiting from and a privatisation of almost all government entities in the non-core sectors, and the shutting down of loss-making State-run enterprises.
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