Political pressure from two of its key southern allies saw the Narendra Modi-led NDA roll-out a ₹11,440 crore revival package - one of the largest in recent times - for the debt-stricken, loss-making state-owned steel-maker, RINL (Rashtriya Ispat Nigam Ltd).

There were plans to divest the steel-plant which are now on the back-burner with allies led by JD(S) and Union Steel Minister, HD Kumaraswamy and Andhra Pradesh CM and TDP Chief, Chandrababu Naidu refusing to budge.

The revival package - first reported by businessline- covers an equity infusion to the tune of nearly 90 per cent - around ₹10,300 crore and a working capital addition - of ₹1140 crore, in the first tranche. There is also a provision to convert the working capital into non-cumulative preference share capital redeemable after 10 years.

“The infusion includes ₹10,300 crore as equity capital into Rashtriya Ispat Nigam Ltd. (RINL) and conversion of ₹1140 crore working capital loan as 7 per cent non -cumulative preference share capital redeemable after 10 years to keep RINL as a going concern,” Union Steel Minister, HD Kumaraswamy said.

In corporate parlance, 7 per cent non-cumulative preference share capital redeemable after 10 years is a type of share that gives the shareholder a claim to a portion of a company’s profits, and the right to redeem the shares after 10 years. The shares are non-cumulative, meaning that any unpaid dividends are not carried forward to future years.

The move is expected to safeguard the future of 30,000 - 35,000 people (workers) of the steel plant, that include those on the payrolls and contractual ones.

Political moves

In a social media post, Andhra CM Naidu said, it was an “emotional and proud moment” for people of the state.

“…as the Union Government, in response to GoAP’s consistent efforts since the formation of NDA, has approved financial support of Rs. 11,440 crore to revive the Vizag Steel Plant,” he wrote while thanking the political top brass including the PM, FM and Steel Min.

“The Vizag Steel Plant … stands as a monument to the struggles and spirit of the people of Andhra Pradesh, holding a special place in the hearts of all, especially the people of Vizag. This was not merely an election promise; it was a deeply personal commitment we were determined to honour,” he added.

The I&B Minister, Ashwini Vaishnaw, said the financial package was cleared by the Cabinet Committee on Economic Affairs (CCEA).

“This is one of the largest financial and revival packages taken up. RINL has a special place in the industry,” he said.

Previously, Steel Minister Kumaraswamy had been keen on revival of the steel plant, and after two revival plans were rejected, reportedly by the FinMin, took up the matter with the PMO.

“The Cabinet has approved the package and the fund infusion is likely post the Budget,” a person in the know told businessline.

Push for reviving RINL

A second tranche of equity infusion or otherwise could be looked at depending on performance of the steel-maker, sources said.

RINL, popularly known as Vizag Steel, has a 7.3 million tonne per annum (mtpa) liquid steel production capacity in Vishakhapatnam, Andhra Pradesh. It has three blast furnaces. Of the three, two are already operational and the third one is likely to be ready post the equity infusion, around August this year.

The revival package aims at operationalising all the three blast furnaces. The attempt is towards a capacity utilisation of nearly 92.5 per cent over the next 18-24 month period.

The steel plant is perhaps amongst the few in India that enjoys direct connectivity with a major port, the Visakhapatnam port.

RINL’s finances

As on March 31, 2024, the company has a negative net-worth of ₹4538 crore.

Current assets were to the tune of ₹7687 crore - odd; while current liabilities were to the tune of ₹26115 crore (approximately).

“The company has exhausted its sanctioned borrowing limits (with banks),” sources said adding that the debt position is “upwards of ₹25,000 crore”.

And the steel-maker has been defaulting on cap-ex loan repayments (including interest dues) from June 2024.

“The equity infusion and working capital addition should help restart work towards a turnaround at the plant,” the official said.

According to sources, the equity infusion of ₹10,300 crore into RINL will help it overcome the operational problems related to raising working capital and start blast furnace operations in the most productive way.

Previously the Steel Ministry had pumped in ₹1650 crore to service debts of RINL, while the forged wheel-making unit at Raebareli – built at a cost of ₹2250 crore, was divested the Railways to secure working capital. The deal included a cash component of ₹1000-crore (apprx) and transfer of debt to the tune of another ₹1000 crore, sources said.

The steel-maker also tried to enter into a commodity-loan and outsourcing arrangement with Naveen Jindal-led JSPL but even then it failed to clear dues to the vendors.

Published on January 17, 2025