Letter by Shri E A S Sarma, Former Secretary, Government of India to the Union Minister of Steel
RINL steel factory workers and the people of Vishakapatnam have fought for revival of the steel factory for the last many years. They have pointed out that Government is purposely attempting to make this factory sick and unviable by not providing raw materials and resources. The workers and the people have stood up against privatisation. The people of the city, men and women, have stood up for common good and not for the profit of a few individuals. Central Government’s financial package to RINL of Rs 11,440 Crore is partial and is not enough for permanent revival is pointed out by EAS Sarma
Letter
03/02/2025
To
Shri H D Kumaraswamy
Union Steel Minister
Dear Shri Kumaraswamy garu,
Kindly refer to my letter of 28th August, 2024 addressed to you on the subject and my more recent letter of 18th January, 2025 addressed to the Union Finance Minister.
I write this letter to you as a concerned citizen from north Andhra Region to convey the widespread disappointment caused by the Centre’s recent announcement of partial financial assistance to RINL of Rs 11,440 Crores (https://pib.gov.in/PressReleasePage.aspx?PRID=2093843), as it neither addresses the root cause of RINL’s financial problems nor does it provide any hope of reviving RINL on a permanent basis.
To put it in a nutshell, the following are the reasons for the present problems of RINL persisting and the circumstances that seem to explain the hesitation (or reluctance) on the part of the Centre to revive RINL on a permanent basis.
- To be able to produce steel at an optimal price and compete with other steel producers, domestic and foreign, RINL should have its own nearby source of good quality iron ore, which the Union Ministry of Mines has obstinately refused to allot over the last several years, though the same Ministry has had no hesitation in allotting multiple iron ore blocks to scores of private miners, allotting in one case more than ten iron ore blocks to one favoured private company. As a result, the unit cost of RINL’s steel has remained high and non-comprtitive, resulting in its losing customers, and causing the present financial crisis. The crisis has compounded year after year, as a result of this
- In gross violation of Para 4.15.4 of its own National Steel Policy (2017) [“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”], instead of grooming RINL into a leadership role in the steel sector, the Union Ministry of Steel, supported by DIPAM, has demoralised RINL’s management and employees, by constantly threatening to privatise RINL and, in that direction, proceeded to leave senior positions of RINL vacant often, year after year, refrained from helping the CPSE in getting logistic support in procuring crucial inputs like iron ore and coke etc. Meanwhile, unfairly blaming RINL for its financial problems, the Steel Ministry started privatising the plant’s operations in bits and pieces.
- Deliberately imposing such financial and managerial problems on RINL, its parent Ministry has meanwhile allowed private mining companies to set shop nearby, eroding its customer base in the south. For example, the Jindal Group was allowed to locate a steel plant in Kadapa and more recently, ArcelorMittal has been permitted to start operations near Anakapalle, hardly a few kilometers from where RINL’s operations are located.
- The Union Steel Ministry must be aware of ArcelorMittal recently threatening to shut down its operations in South Africa, abruptly disrupting that country’s economy (https://sundayworld.co.za/business/closure-of-arcelormittal-sa-plants-catastrophic/). Apparently, the Ministry is more interested in promoting such private mining companies, rather than supporting a CPSE like RINL, which owed its genesis to an intense public agitation in north Andhra region in the late sixties, when several people even went to the extent of sacrificing their lives. The Steel Ministry’s attitude in that respect speaks volumes of the tightening hold of private businesses over politics in India
- RINL is in occupation of more than 18,000 acres (after around 2,000 acres of RINL’s land given away in the past to privately-owned Gangavaram Port), the market value of which may exceed Rs 2 lakh crores. Taking into account the additional value of its plant and equipment and considering that RINL’s employees are highly committed and skilled, the value of RINL as an ongoing entity would be so large that it is doubtful whether any private promoter, domestic or foreign, could ever afford to pay, in case it is privatised. In other words, the Centre’s intention to privatise RINL is only to hand over its ownership to some private party for a pittance, which runs counter to the national interest. It looks as though the Union Steel Ministry and DIPAM are deliberately weakening RINL step by step, so as to facilitate the transfer of its ownership and control to a private party of their choice.
- While the officers’ groups of RINL had hopes of the Steel Ministry paving way for merger of RINL with SAIL as a way to revive it, within hours of the Union Cabinet taking the decision to extend financial assistance to RINL, the Minister of State for Steel ruled out any such merger on the ground that SAIL was reluctant to take over RINL’s outstanding liabilities (https://infra.economictimes.indiatimes.com/news/construction/vizag-steel-plant-will-not-be-merged-with-sail-union-minister-srinivasa-varma/117514256). It looked as though the Steel Ministry, fully aware of the causes of RINL’s financial problems and possible options to resolve them, deliberately ignored those options and made such an announcement, which has only demoralised the employees further. They know that as long as RINL has no convenient iron ore source of its own, its financial problems will get compoiunded more and more in the future and it is the employees who will be forced to pay the price
- As if that was not enough, the Steel Secretary soon followed the Minister’s statement by saying that RINL has “liabilities of ₹35,000 crore with defaults in loan and interest payments ….Therefore, it is the collective responsibility of every stakeholder, including employees, to work towards the betterment of the plant and clear the debts with dedication and commitment” (https://www.thehindu.com/news/cities/Visakhapatnam/visakhapatnam-steel-plant-has-35000-crore-liabilities-says-steel-secretary-sandeep-poundrik/article69155827.ece) That statement in itself conveys the feeling that the Steel Ministry is either deliberately disowning responsibility for mismanaging RINL’s affairs over the years, or it is displaying its total ignorance of the ground realities. How can the employees, who are in no way responsible for RINL’s woes, be asked to clear the debt? The Steel Ministry’s way of handling RINL so far has cast a traumatic burden on RINL’s employees. They are not being paid their salaries, despite their dedication and commitment.
- The Steel Ministry’s statement also exposes the fact that the Union Cabinet approved the financial package of only Rs11,440 Crores, whereas the actual liabilities are more than three times that. Does it not betray Centre’s intention not to bail out RINL on a permanent footing? Since the Union Cabinet did not formally announce dropping the proposal to privatise RINL, does not such a statement also imply that the Centre’s real intention is to allow RINL to bleed further financially, it’s employees get further demoralised, with the Sword of Democles of privatisation hanging over RINL’s head?
As mentioned by me again and again, CPSEs are instruments of the State under Article 12 of the Constitution and they play a vital role in helping the State to trigger regional development based on the welfare norms laid down in the Directive Principles. By weakening a CPSE like RINL, which has played a central role in developing the northern Andhra region, which encouraged many auxiliary industries to come up and empowered thousands of disadvantaged people, the Centre would be doing gross injustice to the region and its own mandate under the Constitution.
No wonder that, during the late sixties and early seventies, almost all people’s representatives from north AP in the Parliament offered to tender their resignations to press home the sentiments of the people, demanding the setting up a steel plant near Visakhapatnam, culminating in the Visakhapatnam Steel Plant being initiasted in 1971. It is a pity that the Centre should pretend ignorance of those events and senselessly pursue a step-by-step dismantling of RINL and its painful privatisation.
Had the representatives of the people of north AP in today’s context emulated their predecessors, a solution to RINL’s revival would have been possible by now!
On behalf of the employees of RINL and on behalf of the people of this region, I appeal to you to consider the following:
- Unless RINL has access to its own source of an operational iron ore of good quality at a convenient location and unless its raw material cost comes down with immediate effect, it cannot compete in the market and sustain its operations in a viable manner. Any revival plan that ignores that aspect is meaningless.
- The first and foremost priority should be accorded to paying the employees their salaries and settling their overdues, to maintain their morale
- The revival plan should be such that, by implementing it, RINL should be free from outstanding debt and all other liabilities (vendors’ dues, payables to contractors etc.) This is within the domain of possibility, considering that the Union Finance Ministry did not bat an eyelid even once in doling out Rs 13,000 crores of PLI subsidy to a profit-earning US company, Micron for setting up a semiconductor plant in Gujarat
- The revival plan should be consistent with Para 4.15.4 of its own National Steel Policy (2017), which enables RINL to play its expected lead role in the steel industry
- If the Steel Ministry fails to make available an operational iron ore immediately to RINL, and clear all its dues, the only ready option available to revive RINLis to merge it with SAIL. In fact, during the seventies, at the time of its inception, RINL started its operations as a part of SAIL.
- Permanent revival of RINL as a vibrant CPSE should be viewed as an issue revolving around the sentiments of the people of this region. This is an issue on which the Centre has dragged its feet for too long, which the people of this region will be reluctant to condone. The Centre should respect the people’s sentiment, as it was forced to do in the late sixties.
I address this letter to you hoping that a senior leader of your stature, fully aware of the role that both CPSEs and State PSUs play in nation building, would come to the rescue of RINL, countering those forces that seem to be pushing it to the brink of privatisation and ensure that RINL continues to play its expected role in the development of the north AP region and assumes its expected leadership role in the steel industry.
Regards,
Yours sincerely,
E A S Sarma
Former Secretary to the Government of India
Visakhapatnam