RINL in talks with NMDC, Tata Intl to mop up funds
Cash-strapped PSU major exploring various business models and the developments are at a nascent stage
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Visakhapatnam Rashtriya Ispat Nigam Ltd (RINL), the corporate entity of Visakhapatnam Steel Plant (VSP), which is plagued by severe working capital crunch, is holding talks with National Mineral Development Corporation (NMDC) and a Tata Group company to explore partnership to mop up funds to increase its production.
While official sources told Bizz Buzz that the company is exploring various business models and the developments are at a nascent stage, a prominent union leader said both NMDC and Tata International separately submitted their proposals to partner with RINL.
RINL had issued a notice on March 27 seeking expression of interest (EoI) from interested parties. Though there was hype over participation by Telangana Government as well as Singareni Collieries Company Ltd (SCCL), a public-sector company, in which Telangana Government has majority stake of 51 per cent equity, neither of them did submit any bid. The Government of India has 49 per cent equity in the mining company. The EoI notice sought potential partners to respond by way of supplying one or more key raw materials (like coking coal /BF coke, iron ore) and in turn, taking steel products as per mutually agreed terms and conditions.
Proposals were also sought for funding working capital and in turn, taking steel products rolled out from the steel plant as per mutually agreed terms and conditions. The aim is to engage with potential partners to evolve a business model after finalising terms and conditions.
AITUC national president and Steel Workers’ Union (the recognised union of RINL) general secretary D Adinarayana, told Bizz Buzz that while Tata International initially offered Rs800 crore at 13 per cent interest per annum and later came down to seven per cent after negotiations, NMDC proposed to take 2,000 acres on lease on payment of Rs1,400 crore. He said one of the big players in the steel industry which submitted EoI in response to March 27 notification, wished to swap the expansion unit on payment of lumpsum amount of Rs20,000 crore.
Ministry of Steel Secretary Nagendra Nath Sinha during his recent visit to Visakhapatnam turned down pleas by the unions to reconsider the privatisation of RINL saying it is a policy decision of the Government of India to privatise PSUs under the non-strategic sector.
Adinarayana said RINL, which is deprived of captive mines unlike all other major steel manufacturers, is facing the worst-ever financial crisis with its liabilities of Rs26,000 crore crossing the halfway mark of total asset value of Rs50,000 crore. Demanding grant of captive mines to reduce production cost drastically and a one-time revival package to put RINL back on the right path, he said the company has bright scope for a turnaround due to talented workforce, strategic location, excellent machinery and a huge land bank of 20,000 acres. A large extent of land, which is in the name of the President of India, should also be transferred to RINL so as to explore land monetisation to a limited extent, he stated.
Due to working capital crunch, RINL is not able to produce at its full capacity. It can make cash profit if it produces four million tonnes out of its annual capacity of 7.3 million tonnes. To enhance capacity from three million tonne to 7.3 million tonnes, the company had to spend around Rs 16,300 crore in phases.
