Andhra Pradesh Chief Minister YS Jagan Mohan Reddy today met Union Minister for Petroleum, Natural Gas and Steel Dharmendra Pradhan and discussed the setting up of Kakinada Petro Complex and represented against privatisation of Visakhapatnam Steel Plant (VSP).

On the second day of his two-day Delhi visit, he held discussions for over an hour and reiterated his appeal to Dharmendra Pradhan to stop privatisation of the VSP and requested him to consider the alternatives suggested by the State to revive the facility.

The Chief Minister explained that VSP had performed well and made profits between 2002-2015. The plant has gone through an expansion by taking loans, but due to the slump in international market during 2014-15, increasing operational costs and handicapped by a lack of captive mines had fallen into debt. VSP has achieved the highest ever capacity utilization of 6.3 million tonnes per annum against the installed capacity of 7.3 mtpa and started making a monthly profit of close to ₹200 crore and continuing this performance for a further period of two years will result in improving the financial situation.

The Plant has 19,700 acres of land which is worth crores and can be monetised to clear the debt and come out of crisis.

Currently, RINL is purchasing iron ore from NMDC Bailadila mines at a market price of around ₹5,260 per tonne of steel. Many of its competitors have captive mines for over 60 percent of their requirement and buy only the rest from NMDC. Even SAIL has own captive mines with reserves of iron ore sufficient for 200 years. This excess cost of iron ore has cost implications of more than ₹3,472 crores for the plant and it is essential to allot captive mines in order to overcome the cost disadvantage.

The Chief Minister requested the Minister to allot the captive mine in Odisha which will help in reviving VSP.

Besides these, Chief Minister YS Jagan Mohan Reddy suggested other possibilities in restructuring the finances of VSP, where all the short term and long term loans could be converted into equity easing the burden. The Plant has a debt of ₹22,000 crore which is being serviced at interest rates as high as 14 per cent. Conversion of these loans into equity and listing the entity on the stock exchange, would remove the interest burden totally, where the banks would also encash through the stock exchange.

Discussing the Kakinada Petro Complex, the Chief Minister pointed out stated that it was provided for in the AP Reorganization Act, when Telangana was carved out as a separate State from Andhra Pradesh. He said that DPRs have been prepared for the project in the Kakinada SEZ by HPCL - GAIL companies together with a capacity of one million tonnes at an investment of ₹32,900 crore.

As the Centre has asked for ₹975 crore per annum under Viability Gap Funding for 15 years, the Chief Minister requested to cut down the VGF since the State could not bear such a burden in the present circumstances. Asserting that the central government has reduced the corporate tax by 25 percent and overall rate of interest across the world had also been reduced, the Chief Minister said that the project can be made possible without any VGF. He said that members have already been nominated for the Working Group on behalf of the State government to discuss the project modalities and asked the Centre to issue immediate directions to start the project.

The Union Minister has assured that a petro complex will definitely be set up in Andhra Pradesh. He told the Chief Minister that a meeting will be scheduled next week with the Chief Secretary and the officials of Petroleum Department to finalise the procedures, according to a statement.

Related Topics
comment COMMENT NOW