NMDC’s move on iron ore puts RINL in trouble

Raw Material Crisis

♦ RINL running with only 4 days stock of iron ore

♦ The plant requires a minimum of 10-15 days of stock to operate blast furnaces

♦ Steelmaker already facing working capital problems

♦ NMDC says it will supply ore from K’taka, not from C’garh

♦ RINL employees say iron ore from K’taka is of low quality

♦ Transportation costs will also go up, increasing burden on RINL

With no immediate relief to the Save Our Soul (SOS) appeals by the employees and all the stakeholders of Rashtriya Ispat Nigam Limited (RINL), the corporate entity of Visakhapatnam Steel Plant to the authorities for restoration of normal supply of iron ore from National Mineral Development Corporation (NMDC)’s Bacheli and Kirandul mines in Chhattisgarh, the Visakhapatnam-headquartered public sector company is being forced to operate its plant with minimal production.

The severe working capital crunch has compounded the situation, forcing RINL to further curtail its production. This has reduced the steel plant to a ‘hand-to-mouth’ existence, as NMDC, with which RINL has a long-term agreement for the supply of iron ore, has reiterated its inability to supply the full quota of the main raw material from Chhattisgarh and has advised RINL to source it from its mines in Karnataka.

While the Chhattisgarh mines are less than 500 km, the iron ore if accessed from Karnataka need to be transported from 900 km, thereby entailing an additional burden of Rs 800 to Rs 1,000 per tonne. NMDC, which is also under the Ministry of Steel, has informed RINL that due to short supply partly on account of heavy rains, it is not in a position to ensure normal supplies from Chhattisgarh.

In a letter to Union Steel Secretary Nagendra Nath Sinha, BJP national spokesman and Member, Standing Committee on Finance, GVL Narasimha Rao sought the intervention of the Ministry of Mines to hammer out a solution to the problem faced by RINL. He said at present, RINL is running with only four days stock of iron ore, while the plant requires a minimum of 10 days of stock even to operate two blast furnaces and 15 days of stock to operate three blast furnaces. This is a matter of great concern and it needs timely intervention, the MP stated.

Informed sources told Bizz Buzz that since August, NMDC is supplying one or two rakes a day instead of three or four forcing it to restrict its production drastically. A senior official said there is no production in Kirandul block and efforts are on at the ministry level to sort out the issue in the larger interest of RINL and NMDC.

Demanding an end to the stalemate, RINL recognised union leader and AITUC national vice-president D Adinarayana, told Bizz Buzz that due to RINL only, NMDC could prosper and was able to tide over its financial crisis during 1989-2001. It is pertinent to mention that still RINL is the main customer to NMDC, which has its head office in Hyderabad and 30 per cent of its turnover and profits are contributed by RINL.

He said in 2006, NMDC committed to supply iron ore from Bailadilla/Bacheli deposits up to a capacity of 11 MTPA. Accordingly, the Government of India approved the RINL expansion to 7.30 million tonne per annum. For producing steel at the full capacity, NMDC is supposed to supply 6 to 7 rakes of iron ore comprising fines, lumps and sized ore daily. He said the Chhattisgarh ore is of superior grade quality compared to ore available in Karnataka.