Letter by Shri E A S Sarma, Former Secretary to the Union Finance Minister
To
Smt. Nirmala Sitharaman
Union Finance Minister
Dear Smt. Sitharaman,
Please refer to my letter of August 27, 2024 addressed to you (https://countercurrents.org/2024/12/drop-rinl-privatisation-forthwith/) on the urgency involved in reviving the CPSE, RINL, preferable by merging it with SAIL.
I have just come across an official press report (https://pib.gov.in/PressReleasePage.aspx?PRID=2093843) that the Union Cabinet has at last decided to extend a financial package of Rs 11,440 crores. which includes ₹10,300 crore as infusion of equity capital and conversion of ₹1,140 crore working capital loan 7% non-cumulative Preference Share Capital redeemable after 10 years to keep RINL as a going concern.
As something is always better than nothing and the latest Cabinet decision does signal a perceptible shift in the NDA government’s attitude towards privatisation of a premier CPSE like RINL, in principle, the latest decision needs to be welcomed.
In particular, let me add that such a defining shift in NDA’s approach to the revival of RINL would not have been possible but for the persistent effort made by Shri H D Kumaraswamy since he took over as the Union Steel Minister, who has an excellent appreciation of the pivotal role that CPSEs play in upholding societal interests and promoting the nation’s self-reliance. Shri Kumaraswamy had personally visited RINL and closely interacted with its employees to understand the ground realities.
A close look at the statement made on the latest Cabinet decision ((https://pib.gov.in/PressReleasePage.aspx?PRID=2093843) indicates that the Union Cabinet had either not been adequately apprised of the root causes of RINL financially becoming weak and reaching a point of no return, or the NDA government is still unwilling to find a more viable approach to reviving RINL on a long-term basis.
While the Cabinet’s latest decision will no doubt enable RINL to pay its employees’ salary arrears and their monthly salaries and it may also enable RINL to start full production with two blast furnaces in January 2025 (or in the near future) and with three blast furnaces in August 2025, it will not allow RINL to function in a financially viable manner and compete successfully in domestic and overseas steel markets, unless it is in a position to secure ready access to good quality iron ore from a captive operational iron ore source of its own.
Without a captive iron ore mine, RINL would continue to be forced to buy ore from others at an exorbitant cost, which in turn would adversely impact its unit cost of production.
It is ironic that the same NDA government should, without batting an eyelid, nonchalantly allow multiple iron ore mine blocks allotted to RINL’s private competitors, permitting the latter to have a marked cost advantage over RINL and capture its remunerative customers. Equally unconcerned, both the NDA government at the Centre and its TDP-JS partner in AP are both working at a breakneck speed to give fast-track approvals to ArcelorMittal, a future private competitor of RINL, for locating its plant hardly a few kilometers from RINL’s location near Anakapalle. Unlike RINL, ArcelorMittal group has already been able to have its own operating iron ore blocks allotted to it.
May I remind both the NDA government at the Centre and its worthy TDP-JS partner in the State that the same ArcelorMittal Group has very recently indicated its abrupt decision to shut down its operations in Newcastle and Vereeniging, as well as the rail and structural subsidiary, ArcelorMittal Rail and Structural, all in South Africa, leading to a devastating impact on several fronts, surrounding communities, suppliers, contractors and the broader metals and engineering sector. It would result in more than 3,500 employees thrown out of their jobs immediately, and hundreds of thousands losing livelihoods in the long run (https://sundayworld.co.za/business/closure-of-arcelormittal-sa-plants-catastrophic/). Should the Centre and the State shower the usual largesse of multiple concessions on such a group for locating a steel plant near Anakapalle, specifically resulting in intruding into RINL’s customer base, with the latter deliberately weakened by the same NDA government by depriving it of its own captive mine?
While the Cabinet’s latest decision to extend financial assistance to RINL is a positive move, on behalf of RINL’s highly committed thousands of employees and on behalf of the people of north Andhra, let me appeal to the Steel Minister and you to find ways and means to revive RINL in the long-run, for it it to be able to play its intended role of a strong CPSE competing successfully in the domestic and the overseas steel markets and, in addition, promote all round social and economic development of north Andhra region.
On the basis of my interaction with RINL’s employees and others who are genuinely concerned about the long-term viability and effectiveness of RINL as an “arm” of the State under Article12 of the Constitution, I feel that the most prudent way to revive RINL at this belated stage is to merge it with SAIL.
Otherwise, I am afraid that such a half-hearted financial relief package will not help RINL in the long run and would only continue its painful “bleeding”.
In this connection, I should once again remind the NDA government that it cannot afford to ignore Para 4.15.4 of its own National Steel Policy (2017) which states, “CPSEs will be encouraged to take leadership role in development of steel industry & the community, adopt a more inclusive business model, increase their CSR spends, invest in R&D for indigenous design & engineering and product development for replacement of import”
I hope that Shri Kumaraswmy and you will suitably rebrief the Union Cabinet and come up with a permanent solution to RINL’s long-term viability and revival, so that its thousands of highly committed employees will feel reassured of their future and the people of north Andhra region stand assured of the NDA government’s genuine commitment to safeguard their long-term economic and social well-being.
Regards,
Yours sincerely,
E A S Sarma
Visakhapatnam
18th January 2025