The opposition to the Indian government’s approval for 100 percent privatization of state-run steel producer Rashtriya Ispat Nigam Limited (RINL) has put forward several alternatives to reviving the ailing company, seeking to reverse the decision to hand it over to private investors, SteelOrbis has learned from several industry stakeholders.
Jagan Mohan Reddy, chief minister of Andhra Pradesh where the RINL 7.3 million mt per year steel mill is located, has written to the central government suggesting that over 7,000 acres of idle land held by the steel company could be sold and to raise funds to revive the company. He said that the funds raised through sale of land will improve the cash on RINL’s balance sheet and ease the estimated accumulated debt of $3 billion at a high interest rate of 14 percent.
Mr. Reddy also proposed that short term-loans of RINL be converted into equity and such a conversion of loans would give lenders and banks an exit option. He said that RINL has five mines in Odisha where mining leases had expired and these could be renewed and this would make around 200 million mt of iron ore available to the steel mill which does not have any captive raw material source and is entirely dependent of merchant purchase of iron ore, including from state-run miner NMDC Limited.
Several political parties opposing privatization have communicated to the central government suggesting a merger of RINL with NMDC Limited.
The political entities protesting against the privatization said that combining the strengths of the steelmaking technology of RINL with the strong iron ore mining capabilities of NMDC would ensure synergies for the merged entity and eliminate the key weakness of shortage of iron ore at the steel company.
A merger of RINL and NMDC would also ensure economies of scale of steel production, combining RINL’s 7.3 million mt per year capacity with NMDC’s greenfield 3 million mt per year steel mill to be commissioned at Nagarmar in Chhattisgarh state later this year, the political parties have suggested to the central government.