RNIL Facing Headwinds In Mission Turnaround

RINL defaulted on repayment of capex loans and interest in June 2024. The equity infusion of Rs10,300 crore is being made to tide over operational problems and achieving installed capacity of 7.3 mn tonne, a senior official tells Bizz Buzz

Visakhapatnam: The ‘Operation Turnaround’ launched by the employees and the management of Rashtriya Ispat Nigam Ltd (RINL), the corporate entity of Visakhapatnam Steel Plant (VSP), is proving to be a Herculean task ahead.

With the debt burden mounting to Rs35,000 crore and the 1,600 employees opting for golden handshake scheme, those remaining need to slog day and night to optimise production and show results. RINL has 12,300 executives and non-executives.

There are also dim chances of getting fresh hands and captive iron ore mines after Rs361 crore invested by RINL in Eastern Investments Ltd in 2010 to gain control over its mines, turned into a bane.

At the time of investment in EIL, RINL had thought of getting 10 to 15 per cent of its iron ore requirements after getting strategic control over Bird Group of Companies through equity investment in EIL, the holding company of Orissa Minerals Development Company OMDC, which owns iron ore and coal mines in the neighbouring State. However, legal tangles and environmental issues have been delaying sourcing the raw material from Odisha. Sources said RINL needed to spend around Rs500 crore towards settlement for sending 1,600 executives and non-executives as part of the decision to prune the size of the workforce.

Of Rs11,440 crore, sanctioned recently by the Centre for revival of RINL, the Ministry of Steel has already pumped in Rs1,650 crore to clear its financial liabilities. Out of the revival plan, Rs10,300 crore will be infused as Government of India’s royalty.

In January 2021, the Cabinet Committee on Economic Affairs (CCEA) had resolved for disinvestment of RINL, its joint ventures and subsidiaries amid the talk that it will be slowly handed over to South Korean steel giant POSCO through a joint venture to manufacture special grade steel.

Union Minister for Steel and Heavy Industries H D Kumaraswamy and Minister of State from the same department Bhupatiraju Srinivasa Varma, during a recent visit to RINL, said, after great difficulty the government agreed for the package to put RINL, the pride of Andhra Pradesh, back on the right track, the RINL workforce need to put in hard work to regain the past glory.

The immediate task is to improve its credit rating, which was downgraded sometime ago due to failure to settle dues to the suppliers and vendors and optimise the production by operating the third blast furnace, which has been shut down for a long time.

“RINL had defaulted on repayment of capex loans and interest in June 20224. The equity infusion of Rs10,300 crore is being made to tide over operational problems related to mopping up working capital and achieving its installed capacity of 7.3 million tonne in a year or so,” a senior official told Bizz Buzz.

Efforts have started to revive the third blast furnace soon so that the plant can manufacture 24,000 tonnes of hot metals a day.

The Ministry of Steel has set a task for the company to achieve full production by August 2025. Sandeep Poundrik, secretary, Ministry of Steel, during a review meeting said they are making efforts to start the third blast furnace in July, generate more revenue and reduce fixed costs, to come out of the present crisis. The management has been told to keep the company as a going concern and generate its own revenues and cater to all its fixed costs including release of salary arrears due for the employees for the past few months.

Referring to the demand for RINL-SAIL merger, the employees have been told candidly that under the present circumstances, no one will come forward to acquire RINL and they need to wipe out all the liabilities. Kumaraswamy did not rule out further allocation of funds or takeover by SAIL saying their first and foremost task is to improve the balance sheet.