NEW DELHI: The Centre is drawing up a plan for the privatisation of Rashtriya Ispat Nigam Ltd (RINL), also known as Vizag Steel, under which the prospective buyer/s would have to commit to expand its 7 million tonne (MT) plant, an official source said. The capacity scope for the unit is pegged at 18 MT.
Also, the government may keep a part of the huge land holding with the state-run company outside the deal’s ambit.
RINL has a massive land pool of 19,000 acres which includes a 6,000-acre green belt. Prospective buyers therefore won’t have to worry about creating a new green belt. However, all these lands are still directly owned by the Centre.
“Given that land is very large, some land has to be kept out of the deal. How much land will be released to the buyer so that it is consistent with their investment plans that structure has to be worked out first,” the official said.
However, with both general elections and Andhra Pradesh state assembly elections due in April-May next year, the process could begin after the polls.
“Like NINL (Neelachal Ispat Nigam Ltd bought by Tata Group in January 2022), privatisation of RINL is crucial to reviving the fortunes of the plant and protecting the interest of the employees,” the official said.
Vizag-based RINL incurred a loss of Rs 3,049 crore in FY23 and its plant capacity is running around 5MT as against 7MT capacity, the source s said, adding that the cost of production of the plant is also not competitive. The company is now facing a severe working capital crunch.
In January 2022, Tata Group bought Odisha-based ailing NINL jointly owned by four central PSUs and two Odisha government PSUs for Rs 12,100 crore. Besides reviving the plant and protecting the jobs of staff, the Tatas are expanding the capacity of the plant with fresh investments.
In line with the Centre’s new Public Sector Enterprise (PSE) Policy, the Union Cabinet in January 2021 had given in-principal approval for 100% disinvestment of the government’s shareholding in RINL along with RINL’s stake in its subsidiaries or joint ventures through strategic disinvestment.
RINL disinvestment will take two to three years to fructify because the asset has to be structured first in order to bring out an expression of interest (EoI), another official said.
“Some conditions have to be kept for post-privatisation that the 7 MT plant has to expand further given the potential of 17 MT capacity…the justification of privatisation is to bring growth and investment,” another official said.
The cooperation of the state government in terms of various approvals is crucial for the transaction given that Visakhapatnam City was created because of the RINL steel plant. Investors also need the comfort of the state government to put their money.
Source: The Financial Express
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