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Vizag – steel shock to financial capital

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It is the jewel of the state, we will protect it: We must look for alternative ways to revive the organization: Our government is ready to work with the Center

This is a plant that has struggled and achieved for a long time.

Let’s be more lenient than withdrawing investment: ‘Plant’ will definitely make a profit: Allocating own mines will reduce the cost of production: Converting loans into equities will not be an interest burden

Chief Minister YS Jaganmohan Reddy has asked Prime Minister Narendra Modi to reconsider the withdrawal of 100 per cent investment in the Visakhapatnam Steel Plant (Rashtriya Ispat Nigam Limited-RINL, Visakhapatnam). Suggested that the company look for alternative ways to revitalize.

He said that the Visakhapatnam Steel Plant, which has been fought for a long time, will remain an indelible mark on the Telugu people and a part of the culture of the state. He said the state government was ready to work with the central government in all possible ways for the revival of the organization. In a letter to the Prime Minister on Saturday, Chief Minister Jagan said the government would protect the steel plant, which is an ornament to the state.

Reports in the media that the Cabinet Committee on Economic Affairs (CCEA) has approved the strategic withdrawal of 100 per cent investment from the Visakhapatnam steel plant, which is run by RINL, have become a hot topic in the state. The Visakhapatnam Steel Plant (VSP), a separate entity under RINL, operates under the Central Steel Branch and is recognized as one of the Navratnas. Visakhapatnam is one of the largest public sector undertakings employing nearly 20,000 people directly and indirectly. The Visakhapatnam Steel Plant, the first steel plant to be set up in the coastal region of the country, is producing high quality steel.

It is an organization achieved through a long struggle. The movement, which has been going on for almost a decade under the slogan ‘Visakha Ukku – Andhrula Right’, has left 32 people dead. It was against this backdrop that on April 17, 1970, the Prime Minister announced the setting up of a steel plant in Visakhapatnam.

It remained in profit till 2015…

I would like to bring to your notice that from 2002 to 2015, Visakhapatnam Steel Plant performed well and walked on the path of profitability. Reported to BIFR in 2002 as a sick industry. The steel plant in Visakhapatnam has 19,700 acres of land. Its current market value is over one trillion. With a production capacity of 7.3 million tonnes, RINL has recently modernized and expanded its production capacity. Efforts have also begun to mobilize resources in that direction. The Visakhapatnam steel plant has also suffered a steady decline since 2014–15 due to the global recession in the sector. The cost of production has risen sharply due to the lack of mines of its own. As a result profits fell completely.

If you do not want to profit…

Rather than withdrawing investment from the Visakhapatnam steel plant, I firmly believe that the company must be on a path to profitability if it is to stand firm. Allocating the required mines to the company will significantly reduce the cost of production. In the same way, I urge you to consider converting high interest loans into low interest loans and converting loans into shares.

Continuous operation to achieve ‘turn around’…

It is a known fact that along with all the sectors related to the economy, the steel sector is also gradually recovering from the recession. While the Visakhapatnam steel plant has a total production capacity of 7.3 metric tonnes, RINL has been operating at a peak production of 6.3 metric tonnes since December last year, earning a profit of about Rs 200 crore per month. If it continues for another two years, the financial situation of the company will change completely.

Own mines to reduce production cost…

The Visakhapatnam Steel Plant is currently buying iron ore from the National Mineral Development Corporation (NMDC) mines in Bailadilla at market price for its production. It is buying iron ore at around Rs 5,260 per metric tonne. All the steel plants in the country have their own iron ore mines. They meet 60 per cent of the requirements of the respective companies and procure the remaining iron ore from the mines owned by NMDC.

Finally, the Steel Authority of India (SAIL), a public sector undertaking, also owns iron ore mines for 200 years. But, the Visakhapatnam steel plant is being bought from NMDC. This places a burden of over Rs 3,472 crore on RINL. Therefore, the Visakhapatnam Steel Plant should be allocated its own mines to compete with the rest of the companies in the sector. This significantly reduces the cost of production. There is an iron ore mine in Odisha. It is a great contribution to the revival of the organization.

Economic reorganization

Converting short-term and long-term loans into equities reduces the pressure on the company to repay the loans. Also, the interest burden on loans is reduced. In addition, the company has a debt burden of Rs 22,000 crore, with a maximum interest rate of 14 per cent. If the banks convert these loans into equities, the interest burden will be completely eliminated and the Visakhapatnam Steel Plant (RINL, Visakhapatnam) will also be listed on the stock exchange. With that process comes the opportunity to raise funds from the public through the stock market.

These measures reduce the debt burden on the company. There by improving performance as well as being financially flexible. It is therefore necessary to reconsider the decision taken to strategically withdraw one hundred per cent investment in the Visakhapatnam steel plant and look at alternative ways to revive the company. I wish the restoration process of the Visakhapatnam Steel Plant, which is very valuable and important to the community, especially the people of the state, to continue.

 

 

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