Vizag Steel Plant's future hinges on outcome of 2024 General Elections

Telangana Chief Minister Kalvakuntla Chandrashekar Rao is adept at building a political narrative as also a counter narrative. This was amply evident during the prolonged agitation for a separate Telangana State. His forte in this space came to the fore yet again when he recently took a strong stand against the proposed privatisation of Rashtriya Ispat Nigam Limited (RINL), the corporate entity of Visakhapatnam Steel Plant (VSP).

The Narendra Modi-led NDA government at the Centre announced divestment of its 100 per cent stake in Visakhapatnam-based RINL, way back in January 2021. Since then, employees of the steel plant and social activists have been agitating against this decision. Even the Andhra Pradesh government, headed by YS Jagan Mohan Reddy, opposed the move, tooth and nail.

But the Modi government has not budged an inch as the decision is a part of its publicly-stated policy of 'the government has no business to be in business'. Under this, it has been trying to sell its stake in all the central public-sector enterprises (CPSEs), which are not of strategic importance for the government. As the disinvestment process is getting delayed and the steel plant is incurring losses, RINL has recently come up with a barter deal proposal whereupon it will supply its steel products to entities which provide working capital or supply raw materials like coking coal, iron ore and blast furnace coal, or both.

This is obviously an attempt to meet RINL’s working capital needs to sustain it as a 'going concern' till the disinvestment process is completed because the central government seems to be reluctant to pump in more funds into the debt-ridden steel plant. On March 27, RINL issued a public notice seeking Express of Interest (EoI) for the barter deal with April 15 as the deadline, which was subsequently by another five days.

Post the EoI notice, the Telangana government led by KCR, as K Chandrasekhar Rao is popularly known, sprang a surprise by announcing its intention to invest in RINL to save it from privatisation. It immediately dispatched a team from Singareni Collieries Company Limited (SCCL) to check the feasibility.

However, one should take this as a pure political move. KCR, who renamed Telangana Rashtra Samithi as Bharat Rashtra Samithi (BRS) to pursue his ambition of playing a key role in national politics, wants to make his presence felt in Andhra Pradesh as well. There is nothing wrong with that. As a politician, he has every right to expand his political party, wherever, he wants. But dabbling in Andhra Pradesh politics is an audacious move as his strong anti-Andhra stand during the Telangana agitation is well-known.

Expectedly, the AP’s ruling YSR Congress Party, its representatives and Ministers lashed out at the Telangana government’s attempts to penetrate into their State. Telangana Ministers also joined the fray, raising political heat and berating their AP counterparts. Union Minister of State (MoS) for Steel, Faggan Singh Kulaste, who was in Visakhapatnam last week, added fuel to the 'RINL political slugfest' by announcing in the morning that the disinvestment process was put on hold, and retracting his statement by evening.

In between, BRS landed in a political soup after claiming victory in its week-day long battle for VSP's protection!

But the moot question is whether the Telangana government has the wherewithal to mop up funds to the tune of at least Rs 5,000 crore for RINL takeover. Of course, SCCL, as a coal mining company, is eligible to submit EoI and, if it succeeds, it can go for a takeover of RINL later.

But what will SCCL do with the steel to be supplied by VSP in exchange for the raw materials supplied or capital provided remains the million dollar question. Will it sell the steel products in the open market or consume it? Furthermore, the same central government which put up RINL for sale has a 49 per cent stake in SCCL. Can the coal miner take such a major decision without the consent of the Centre?

The tricky questions apart, KCR will obviously face some political backlash in Telangana for his benevolence towards Andhra Pradesh though the political Opposition is still weak in the State. The proposal for Bayyaram Steel Plant has been pending for a long time. The KCR government may have to answer why it has not taken up the plant on its own if it has such a large quantum of funds at its disposal to bid for RINL.

Furthermore, State Bank of Hyderabad (SBH), founded by seventh Nizam of Hyderabad State in 1941, had a rich legacy and history. It was one of Hyderabad's landmark entities. At last count, it had 2,000 branches, 18,000 employees and was churning profits. But it slipped into history when it was merged with its parent State Bank of India (SBI) in April 2017. But the BRS (then TRS) government did not even make a symbolic protest against the merger. These and several other issues will come to the fore if the KCR government stretches the RINL issue too far. It is to be seen how the BRS leadership will defend itself.

However, one thing is true. KCR’s sudden move on RINL brought its disinvestment issue back into focus. He should get credit for it.

But what will happen to RINL now? Though the Union Steel Ministry has announced that the disinvestment of RINL is under progress, the process is unlikely to be completed anytime soon. Further, Centre is not likely to expedite the process at this point in time considering that the General Elections are just a year away. And so are elections for the AP Assembly.

However, the process will obviously gain traction if the Modi government gets a record third successive term at the Centre. Otherwise, there are some chances of RINL retaining its CPSE tag. That way, the future of RINL is now inextricably linked to the outcome of the 2024 General Elections!