The controversy and protests over the Indian government’s move to privatize steel producer Rashtriya Ispat Nigam Limited (RINL) can be resolved through a series of mergers of government companies operating in the steel industry and creating a government-owned steel behemoth, a group of former government officials, including a former chief executive officer (CEO), stated in a letter to India’s prime minister Narendra Modi, on Wednesday, March 24.
The group of former government officials and steel industry senior managers have suggested that the government reverse its decision on privatizing RINL and instead consider the option of a merger of iron ore miner NMDC Limited, Steel Authority of India Limited (SAIL), iron ore pellet producer KIOCL Limited, and Neelachal Ispat Nigam Limited (NINL) - a steel producer also on the list for privatization.
The group of officials said that such a merger would be implemented in stages and the final merged entity would emerge as a domestic steelmaking behemoth with an installed capacity of around 50 million mt per year with efficient raw material linkages of iron ore mines, and at the same time would maintain its government-ownership status.
Elaborating the sequential strategy, they communicated to the prime minister that in the first stage RINL should be merged with iron ore producer NMDC Limited and the lack of captive iron ore mine which is the main reason for the mounting losses of RINL would be resolved. In the process of the merger, surplus land available at both RINL and NMDC estimated at around 2830 acres and the potential for development of this land could yield an estimated $1.25 billion - roughly equivalent to what the government would net through disinvestment of its equity stake in RINL.
In the second stage, the merged entity of RINL-NMDC could be merged with SAIL, and thereafter with pellet producer KIOCL, with the final merged entity enjoying the best backward and forward linkages in raw materials and finished products, the group of officials said.
Such a creation of a mega steel mill with vast captive raw material would also ensure higher efficiencies of synergy with savings estimated at $250 million per year, the officials said.
Meanwhile, workers and trade unions at RINL have served a notice for an indefinite strike at the 7.3 million mt steel mill at Vishakhapatnam from March 25 to oppose the government decision for the 100 percent privatization of the company.