Vizag Steel Plant Divestment Move Faces Resistance, Andhra Chief Minister Asks PM Modi To Reconsider Decision

The Cabinet Committee on Economic Affairs' (CCEA) decision to privatise the public sector unit Rashtriya Ispat Nigam Ltd (RINL), the corporate entity of Vizag Steel Plant, is being stiffly opposed in Andhra Pradesh, particularly by Opposition parties.

On 3 February, the CCEA cleared the privatisation of RINL to raise Rs 1.75 lakh crore from selling its stake in the next financial year.

Industry leaders see the proposal as a positive move to help tide over the plant’s liquidity problems.

Left parties and trade unions owing affiliation to them, though, have staged protests against the decision starting with a road blockade on 6 February. They have threatened to intensify their agitation against the move.

Andhra Pradesh Chief Minister Jaganmohan Reddy has written to Prime Minister Narendra Modi to reconsider the divestment move.

He told the Prime Minister that the State government was willing to work with the Union Steel Ministry to protect the 20,000 workers of the plant, besides hundreds of those indirectly getting employment from it.

Terming it “Jewel of Andhra Pradesh”, Reddy urged Modi to look at other opportunities to revive the plant’s financial health.

Vizag Steel Plant’s financial woes arise from the loans it had availed of from banks to modernise and expand its capacity. Currently, it produces 7.3 million tonnes of steel a year.

In a further political twist to the development, Telugu Desam Party (TDP) member of the legislative Assembly from north Visakhapatnam, Ganta Srinivasa Rao, has resigned in protest against the RINL privatisation move.

He said he would launch a non-political joint action committee to force the Union government to revoke its decision.

Industrialists and industrial bodies say any further delay in the steel plant’s divestment will result in higher losses. They feel that the Centre is not in a position to inject the much-required liquidity or invest further in the plant.

Local media quoted Confederation of Indian Industry - AP Chapter President D Ramakrishna as saying that the disinvestment should not be viewed negatively in the face of liquidity crunch.

“If we go on taking loans to invest, interests will become a burden over time, and hamper growth and may result in further losses,” he was quoted as saying by New Indian Express.

Ramakrishna, who had taken part in the agitation seeking a steel plant in Vizag, assured the workers that their interests would be safeguarded even as Union and State governments would continue to receive revenue.

Privatisation would only result in a change of hands, he said, pointing out how BSNL was accumulating losses in view of a delay in the decision to divest its stakes.

Those opposed to the privatisation move feel the Centre can look to raising funds from selling the huge land holdings the Vizag steel plant has.

During 2019-20, RINL’s turnover was Rs 15,800 crore. It produced 4.98 million tonnes of liquid steel and 4.46 million tonnes of saleable steel.

Though RINL earned Rs 97 crore profit in 2018-19 fiscal, it incurred net losses of Rs 1,321 crore in 2017-18, Rs 1,236 in 2016-17 and ₹1,421 crore in 2015-16.

During 2019-20, the Vizag Steel Plant modernised at Rs 4,000 crore to raise its production capacity to 7.3 million tonnes a year from 6.3 million tonnes.