RINL plans land sale to mop up working capital

Visakhapatnam In another bid to overcome the severe working capital crunch, Rashtriya Ispat Nigam Limited (RINL), the corporate entity of Visakhapatnam Steel Plant considered ‘Andhra’s pride’ has decided to vigorously pursue monetisation of land.

RINL management at present is also in the process of inviting tenders for Expression of Interest to become its partner as part of an attempt to provide working capital and raw material support in exchange of finished steel rolled out from the steel plant here. The management has offered to several public sector units to buy its surplus lands. The value of lands offered are estimated to fetch Rs1,000 crore or more. A letter dated June 9 sent to Powergrid Corporation of India Ltd (PGCIL) was ‘leaked’ in the media in which RINL offered, among others, 588 plots spread over 45 land parcels measuring 22.90 acres. Other bits include 76 houses in four land parcels in an extent of two acres at Autonagar, Gajuwaka and eight houses in an extent of 434.75 square yards at Old Health Centre, Pedagantyada. RINL sought response on buying the houses/sites in full or partially within 10 days of sending the letter.

RINL, which is under 100 per cent privatisation as per the decision taken in 2021 by the Cabinet Committee on Economic Affairs, has a production capacity of 7.3 million tonnes per annum. The company invested nearly Rs 16,700 crore to expand its capacity in phases from three million tonnes. RINL/Vizag Steel, one of the best steel plants, started its journey as part of SAIL till 1982. RINL was formed in 1982 as a separate entity. Unfortunately, captive iron ore mines were not allotted to RINL at that time. SAIL retained the mines reserved for Vizag Steel.

Since then RINL has been suffering due to the lack of captive iron ore and coal mines. RINL’s raw material cost as per a conservative estimate is 63 per cent of total production cost whereas that of SAIL’s and Tata’s is 48 per cent and 35 per cent, respectively. Both have their captive mines.

RINL is losing about Rs 1,500 crore to Rs 2,000 crore per annum exclusively on account of lack of iron ore. Though RINL has been performing well, only on account of high input cost on material, its net profit has become negative for the past four years. Added to this, huge borrowings (nearly Rs 20,000 crore) from the market to increase the plant capacity as per GoI plan has further worsened its financial position.

Another major reason for high cost of production in RINL is low utilisation of machinery as the company could run at less than four million tonne capacity. If RINL is remerged with SAIL, RINL’s cost of production will be much lower than SAIL units. It will benefit the government and the nation, Steel Executives Association (SEA), the officers’ body of RINL, said in a representation to Union Home Minister Amit Shah in Visakhapatnam on Sunday.

SEA general secretary and president KVD Prasad and Katam SS Chandra Rao stated in the representation that recent initiatives of the central gover led by Prime Minister Narendra Modi like enhancing budget allocation to infrastructure for Railways, national highways, ports, housing sector and low interest rates for housing loans are helpful for the growth of steel sector.

In a series of representations to the Central Government, they said RINL’s financial position deteriorated with a heavy loan burden of Rs 20,000 crore forcing the company to struggle to meet its both ends.

A steel plant with high productivity and modern technology as its strength needs urgent attention and it is noteworthy that RINL has registered PBT of Rs 942 crore during FY 2021-22 as a healthy sign for a turnaround.

Lands for sale

• 588 plots spread over 45 land parcels measuring 22.90 acres

• 76 houses in 4 land parcels at Autonagar, Gajuwaka

• 8 houses in 434.75 square yards in Pedagantyada