RINL-Jindal blast furnace deal kicks up row

Though the deal is signed in a hush-hush manner, the management has not consulted us, neither told us any information on the benefits RINL will get due to the MoU - D Adinarayana, Co-Chairman of Visakha Ukku Parirakshana Porata Committee, tells Bizz Buzz

Surging Spend on 2 Furnaces

• RINL incurring expenditure of Rs100 cr on depreciation
• Rs224 crtowards salaries
• Rs50 cr towards maintenance
• Rs184 cr towards interest on loans for machinery
• For running 3rd blast furnace, Jindal not committed to pay

Visakhapatnam: The reported decision of Rashtriya Ispat Nigam Ltd’s (RINL) management to hand over the management of the third blast furnace of Visakhapatnam Steel Plant (VSP), which has been lying idle for over two years, to a private company starting December 30, has kicked up a new row. According to Atual Bhatt, CMD, RINL, the VSP has entered into an agreement with the Jindal Steel and Power Ltd (JSPL) to manage the third blast furnace for two years.

“Though the deal is signed in a hush-hush manner, the management has not consulted us, neither told us any information on the benefits RINL will get due to the MoU,” D Adinarayana, Co-Chairman of Visakha Ukku Parirakshana Porata Committee, told Bizz Buzz.

J Ayodhya Ram, CITU leader and co-convener of the committee, an apolitical front formed by the rival trade unions to fight against privatisation of RINL after the Cabinet Committee on Economic Affairs cleared the proposal for 100 per cent privatisation in January, 2021, staged a protest during the day at the CMD’s chamber to register against what he termed as a ‘shady deal’ and a first step towards handing over RINL on a golden platter to private investors.

He told this correspondent that despite repeated requests, the management failed to divulge any information on the deal signed with JSPL in New Delhi on December 19 and explained how he ignored their pleas for entering into a deal with Sail to run the third blast furnace.

JSPL was one among 29 bidders who responded to the Expression of Interest (EoI) notified by RINL on March 27 seeking proposals to become partners with RINL for working capital support or raw material supply. As of today, RINL entered into an agreement with Tata International for getting raw material funding support. It is continuing talks with SAIL, TISCO and NMDC to come to some understanding for partnership. While Adinarayana said there is no clarity on input and fixed cost, Ayodhya Ram pointed out that for operating blast furnaces 1 and 2, RINL is incurring an expenditure of Rs100 crore towards depreciation, Rs224 crore towards salaries, Rs50 crore towards maintenance and Rs184 crore towards interest on loans borrowed for the machinery.

For running the third blast furnace, Jindal has not committed to pay anything.

Due to resource crunch for procuring raw material, RINL shut down the third blast furnace, which was installed by incurring an investment of Rs6,000 crore as part of capacity augmentation. At present, VSP has a production capacity of 7.3 million tonnes per annum.

However, working capital and raw material problems have forced it to produce only 13,000 to 14,000 tonnes per day.

“Management of RINL has prepared a strategic plan for infusion of much needed liquidity in the company which has been discussed with its executives and workers’ unions and the management is moving ahead with its plan to start the third blast furnace on December 30,” the company stated earlier in response to charges made by some union leaders on procurement of poor quality raw materials. However, the company has not yet issued any official reaction over handing over the third blast furnace to a private company.

In another development, social activist and former IAS officer EAS Sarma, in a letter to Nagendra Nath Sinha, Union Steel Secretary, said: “The Ministry of Steel can’t contend, as it did in the past, that the decision to hand over the blast furnace to a private party is a managerial decision and it had nothing to do with it. This is a facile argument as two senior officers of your ministry are a part of VSP’s Board of Directors.”

He said it is unfortunate that the Ministry of Steel and Ministry of Finance should wash their hands off on providing a debt-restructuring facility and liquidity support to VSP, whereas the Centre has had no hesitation whatsoever in extending mind boggling subsidies of the order of Rs2 lakh crore over five years to profiteering private companies under a highly questionable Production Linked Incentive (PLI) scheme.